MINUTES SENATE FINANCE COMMITTEE April 8, 1994 8:30 a.m. TAPES SFC-94, #61, Side 1 (700-end) SFC-94, #61, Side 2 (end-000) SFC-94, #63, Side 1 (000-end) SFC-94, #63, Side 2 (end-350) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 8:50 a.m. PRESENT In addition to Co-chairs Pearce and Frank, Senators Rieger, Jacko, and Sharp were present. Senators Kerttula and Kelly joined the meeting after it was in progress. ALSO ATTENDING: Paul Fuhs, Commissioner, Department of Commerce & Economic Development; David Rogers, legal consultant to Senate Finance Committee; Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources; C.E. Swackhammer, Deputy Commissioner, Department of Public Safety; Michael Walleri, General Counsel, Tanana Chiefs Conference; Susan Sorensen, fiscal analyst, Legislative Finance Division; representatives of the media, aides to committee members and other members of the legislature. VIA TELECONFERENCE: The following individuals testified on SB 308: Peter VanTuyn, Trustees for Alaska, Anchorage; Dorn Hawxhurst, commercial fisherman, CDFU, Cordova; Alice Ruby, Chair, CRSA Board, Bristol Bay, Council member, City of Dillingham, and alternate representative of Alaska Coastal Policy Council, Dillingham; Betty Glick, Kenai Peninsula Borough, Kenai; Wayne Coleman, RCAC, Kodiak; Chuck Degnan, Coastal District Director, Coast Resource Service Area, Unalakleet; Brad Penn, Marathon Oil Co., Anchorage; Jon Isaacs, Jon Isaacs & Assoc., Anchorage; Fran Bennis, Alaska Marine Conservation Council, Anchorage; Sue Flensburg, Bristol Bay Coastal Resource Service Area, Anchorage; Walt Furnace, General Manager, Alaska Support Industry Alliance, Anchorage; Steven Porter, ARCO, Anchorage; Theo Matthews, United Cook Inlet Drift Association, Kenai; Loren Flagg, Kenai Peninsula Fishermen's Association, Kenai; Nancy Lord, commercial fisherman and public citizen, Homer. Later in the meeting, Daniel Moore, on behalf of the Mayor of Anchorage, and Municipality of Anchorage; and Richard Weinig, trial attorney, testified on SB 203 via teleconference from Anchorage. SUMMARY INFORMATION CSSB 203(CRA) An Act relating to police protection service areas in unified municipalities; and to police protection provided by the state in certain municipal areas. Discussion was had by Senators Kerttula, Rieger and Kelly. Daniel Moore, on behalf of the Mayor of Anchorage and the Municipality of Anchorage, was opposed, and Richard Weinig, trial attorney, testified in support of SB 203 via teleconference from Anchorage. C.E. Swackhammer, Deputy Commissioner, Department of Public Safety, was also opposed to SB 203. SB 203 was HELD in committee. CSSB 308(RES): An Act modifying administrative procedures and decisions by state agencies that relate to uses and dispositions of state land, property, and resources, and to the interests within them, and that relate to uses and activities involving land, property, and resources, and to the interests within them, that are subject to the coastal management program when the use or activity is to be authorized or developed in phases; and providing for an effective date. CSSB 308(FIN) work draft "U" was ADOPTED by the committee. David Rogers, legal consultant to Senate Finance Committee; Kyle Parker, Special Staff Assistant, Office of the Governor; Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources; and Paul Fuhs, Commissioner, Department of Commerce & Economic Development, testified in support of CSSB 308(FIN) work draft "U". SB 368: An Act relating to the human services community matching grant program; and providing for an effective date. Senator Sharp read the sponsor statement. SB 368 was REPORTED OUT of committee with a "do pass," and a zero fiscal note for the Department of Health & Social Services. CS FOR SENATE BILL NO. 308(RES): An Act modifying administrative procedures and decisions by state agencies that relate to uses and dispositions of state land, property, and resources, and to the interests within them, and that relate to uses and activities involving land, property, and resources, and to the interests within them, that are subject to the coastal management program when the use or activity is to be authorized or developed in phases; and providing for an effective date. Co-chair Pearce announced that SB 308 was before the committee and invited Kyle Parker, Special Staff Assistant, Office of the Governor; David Rogers, legal consultant to Senate Finance Committee; and Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources, to join the members at the table. Co-chair Pearce noted a drafting error on SB 308 work draft "U" on page 7, lines 29, 30 and 31. An errata sheet had been sent out with the correction. End SFC-93 #61, Side 1 Begin SFC-93 #61, Side 2 Co-chair Frank MOVED for adoption of CSSB 308(FIN) work draft "U". No objection being heard, it was ADOPTED. DAVID ROGERS asked Jim Eason to speak to the changes in the CS. JIM EASON said that substantive changes had been made to the bill. Five meetings had been held with interested parties to draft amendments. He said that CSSB 308(FIN) was an attempt to bring those interests together and still provide the protection for the continuation of a leasing program. Mr. Eason said one main concern was that the bill did not say what the intent had been. He said that Section 1 had been rewritten and stood as the keystone of the bill. One example was the word "direct" that had received much criticism and had been changed to "reasonable foreseeable effects." Another concern in Section G was language that would restrict impact reviews by Fish & Game. That language had been deleted and reverted back to existing statutes. Mr. Eason went on to say that there had been interest in earlier and more extensive explanations of what was proposed in oil and gas findings. The Ombudsman prepared a report making specific recommendations including one to mandate the preparation and issuance of a preliminary best interests findings for oil and gas leasing. This was contained in the bill. Also, other amendments said that a preliminary finding for oil and gas lease sale would be issued no later than six months before a proposed sale and the public would have a minimum of 60 days to make comments to the department. Mr. Eason commented on the opinion what had lead to the introduction of SB 308 was the abuse of the Judicial system by some of the cases that had gone to court. Although the opinion was not universal, the bill addressed some of the troubling patterns of lawsuits that preceded this legislation. The intent was to encourage both full and timely public participation. It also told the court, in pursuing an appeal of a decision to hold a lease sale, the person that pursued that appeal had to have participated in the administrative process leading to the decision. That person or group would have to have participated in a meaningful way so that their specific concerns were identified in the administrative process. It also proposed that the individual or group had to appeal through administrative remedies including the Commissioner's office before going to the Superior Court and also, that in pursuing an appeal to the Superior Court, new issues could not be raised that had not been raised in the administrative review. These amendments were found in Section 4, particularly subsection I, J, K, and L. Mr. Eason said that in concerns regarding the amount of notice and type of notice that were given for oil and gas leasing, SB 324 was used to draft proposed amendments to Section 7. The amendments expanded the notice given for oil and gas leasing by insuring that not only was the lease to be published but display ads would be used for a better understanding by the public, and mandatory notice by electronic media would be sent setting a new minimum standard for notice options. Finally, Mr. Eason said that the last major change was to the section dealing with Title 46 amendments. Two concerns were that there was a different standard for reviewing projects on the federal and state level by the use of the term "direct", and that "phased consistency determinations" was not sufficiently defined. In answer to Co-chair Pearce, Mr. Eason said that language addressing "phased consistency determinations" following federal regulations could be found in Section 8. He felt that both concerns he mentioned had been addressed in the new CS. In answer to Senator Rieger, regarding the phrase "in the area", Mr. Rogers said those words had been removed from CSSB 308(FIN). At this time, Co-chair Pearce announced the teleconference portion of the meeting would begin. PETER VANTUYN, Trustees for Alaska, testified from Anchorage that he had just received the bill. It struck him that CSSB 308(FIN) went further than any legislation he had seen in limiting meaningful public input in the state agency decision making process. It was questionable whether the public would be able to give meaningful input in the phasing process. Besides phasing, he had two other main concerns. One was that a person or individual had to have raised an issue previously. He felt that precluded the public from raising issues flagged by expert agencies. Secondly, the bill changed rules under which an appeal could be taken. The public would have no opportunity of stopping a lease/sale similar to sale 78. DORN HAWXHURST, commercial fisherman, Cordova District Fishermen United, testified from Cordova in opposition to SB 308. She said that experience from Sale 79 caused concern. She said the Department of Natural Resources failed to quantify, analyze or look at the sockeye fishery, and even failed to mention that commercial fishing occurred in the area at all. Old data had been used even though more recent data was available from Alaska Department of Fish & Game and the Forest Service. Hazards of oil transport in the Gulf of Alaska, or the effects of the sale on communities of Yakutat and Cordova had not been addressed. She was discouraged by the fact that the PBIS for lease sale 78 was practically copied verbatim for lease sale 79. She said that CSSB 308(FIN) removed the opportunity for the public to give meaningful input to a lease sale. ALICE RUBY, chair person of the CRSA Board, Bristol Bay, council member for the City of Dillingham, an alternate representative for the Alaska Coastal Policy Council in Dillingham, and former Land Manager for Dillingham and two other communities, said she had an appreciation for land management and development issues. She read from a briefing paper from local representatives of coastal districts, municipalities, and coastal resource service areas who had been reviewing SB 308. She listed the communities and other organizations that had been meeting with DNR to address SB 308. The three main questions addressed were: what was the appropriate scope of review under Title 38 for best interest findings; what form of projects phasing, if any, should be considered under Title 38 for all best interest findings; and what form of project phasing, if any, should be considered under Title 46. She recommended that the legislature or any working groups should not proceed with any phasing language without a broad-based working group to resolve the major problems the present language in SB 308 presented. She also noted that there had not been enough time to review the new version of SB 308 and supported holding the bill in committee. In answer to Co-chair Pearce, Ms. Ruby said the position paper had been faxed to the committee. BETTY GLICK, Kenai Peninsula Borough, testified from Kenai in opposition to SB 308. She felt the bill appeared to prevent the public and local communities from participating in and commenting on potential development within the municipality's boundaries. During the lease sale 78, there was not enough time and information for public comment. She suggested that each new development area be viewed within the big picture as well as the smaller area of impact. WAYNE COLEMAN, member of the executive committee for Prince William Sound Regional Systems Advisory Council (RCAC), testified from Kenai in support of language by the Coastal Districts and the oil industry to limit the language of SB 308 to the title 38 best interests findings scope of review and convene a broad based working group to address the issue of phasing for all projects. RCAC also urged, that before SB 308 was finalized, the legal, physical and definitional questions raised in earlier hearings were answered, and that local governments, industry and public citizens, had an adequate opportunity to review the information presented in version "U". CHUCK DEGNAN, Coastal District Director for Coastal Resource Service Area, testified from Unalakleet, in opposition to SB 308. His main objection was the concentration of administrative power at the Director level, and the elimination of meaningful public participation through administrative procedures. BRAD PENN, Marathon Oil Co., testified from Anchorage in support of CSSB 308(FIN) version "U". He felt the Director should be able to limit the review without being arbitrary. He read the definition of projects as related to phasing. JOHN ISAACS, Jon Isaacs & Assoc., testified from Anchorage, and said he had been a participant in the working group meetings. He was in support of holding SB 308 in committee for further hearings. He referenced the Coastal Position Paper. There were three points he wanted to emphasize. One amendment removed DNR's requirement to respond with substantive response to public comments. Co-chair Pearce called his attention to the errata and he moved on to his next concern. He felt all the best interest findings were not suitable to phasing. Also, he felt the phasing coastal consistency determination did not lend itself to a simple fix. There did not seem to be any guarantee that the state's decision to phase a project could be appealed or elevated. He said language contained in Title 38 was not found in Title 46. He gave examples of inappropriate projects that went to phasing and that had created problems such as the Valdez Princess Star project and the Deep Sea Processing proposal. A broader task force had been requested because of such projects. He did note and appreciate that some suggestions had been incorporated into the CSSB 308. Mr. Isaacs stated that Linda Freed, Planning Director for Kodiak Island Borough, asked that SB 308 would be HELD in committee. She was unable to testify today but planned to be in Juneau next week. MICHAEL WALLERI, General Counsel for Tanana Chiefs Conference, testified in person. He said that providing timely and meaningful notice was an important part of the public process and appreciated its articulation in the legislation. He felt it was especially important in resource disposal issues. End SFC-93 #61, Side 2 Begin SFC-93 #63, Side 1 Mr. Walleri noted that rural Alaska had a difficult time getting meaningful notice within 30 days. If an agency sent out a notice, it could take at least two weeks to reach a village. He proposed an amendment that would change 30 to 60 days. The second recommendation he made was under notice of consideration that would change 20 to 30 days which was a more acceptable time of response. SENATOR SHARP asked if his suggested amendments were adopted, would Mr. Walleri support CSSB 308(FIN). Mr. Walleri said that SB 308 was not the type of legislation his organization could support. He felt that the phasing for oil and gas was unique to that industry and recommended that oil and gas be dealt with separately. PAUL FUHS, Commissioner, Department of Commerce & Economic Development, said that SB 308 was one of the most important pieces of legislation before the legislature. He felt it was a common sense way to deal with the legal difficulties surrounding oil and gas and other resource industries. The court stated that the law had not been given clear enough directions so it had to take the broadest and most speculative view on resource development. He said asking a company to come up with every speculative use and potential alternative option in a project was a problem and restricted development. He felt this legislation would give the public adequate review and would keep certain environmental organizations from shutting down development completely. Mr. Fuhs contested the comment that the ACMP process was a cooperative one. He said the way the laws were set up problems could not be mediated because it was a quasi- judicial review panel. SB 238 proposed to address this situation. For two and half years, a land use issue had continued and now the case had gone to court. He supported this legislation because it gave clear direction. Senator Sharp reiterated the need for positive direction to the court and adequate public process, and hoped that SB 308 would provide that. FRAN BENNIS, Alaska Marine Conservation Council, consisting of commercial, sport and subsistence fishermen, and coastal residents, testified from Anchorage and requested that SB 308 would be held in committee. She felt it gave too broad of discretionary powers to DNR administrators and made it difficult for the public to give meaningful review especially in rural areas. SUE FLENSBURG, Bristol Bay Coastal Resource Service Area, testified from Dillingham. She asked that the Coastal District Briefing Paper sent to the committee be included as part of the record (see Attachment A, copy on file in the committee minute book). She testified in opposition to CSSB 308(FIN) and said she preferred a good clean process. WALT FURNACE, General Manager, Alaska Support Industry Alliance, Anchorage, testified from Anchorage in support of CSSB 308(FIN). He felt the CS provided for the public hearing process, and gave DNR authority to assert its leadership in controlling the oil and gas programs. He urged the passage of CSSB 308(FIN). STEVEN PORTER, ARCO Alaska, testified from Anchorage in support of CSSB 308(FIN). He felt it encouraged public comment. THEO MATTHEWS, United Cook Inlet Drift Assoc. and United Fishermen of Alaska as a member of the Habitat Committee, testified from Kenai opposing SB 308. He had just received the bill but Section 8 and 10 were still not acceptable. He referred to written comments provided to the committee. Whenever phasing was done without considering future development, problems would arise. He asked how a best interest findings could be done if in Section 4, DNR would not even have to speculate about economic feasibility of ultimate development. He said that his other concerns would be provided in writing to the committee. LOREN FLAGG, Kenai Peninsula Fishermen's Association, testified from Kenai opposing CSSB 308(FIN). He said the bill was an overreaction by DNR to the problems in the courts. He was especially opposed to phasing and felt concerns should be addressed at the lease/sale stage. He blamed DNR and not the laws and regulations. He felt DNR had done an inadequate job in evaluating concerns of the people in the lease/sale areas, including transportation and commercial fishing issues. He asked that CSSB 308(FIN) be held in committee. NANCY LORD, commercial fishermen in Cook Inlet and public citizen, testified from Homer opposing CSSB 308(FIN). She wanted to remind the committee that there were competing interests in the coastal regions of the state and all those interests needed to be able to provide input into any decisions made by DNR. She said that in Kenai there was a great marine interest and tourism industry. Commercial fishermen were not opposed to all oil and gas leasing but there were places where the two industries conflicted. She cited a recent spill in the inlet that was not cleaned up and had been carried downstream by strong tides as an example. She encouraged the committee to reconsider the phasing process. Finally, she supported including Senator Little's language in SB 308 but gave it little weight towards public involvement. She asked SB 308 be set aside and asked for support of Senator Little's bill, SB 324. Co-chair Pearce said that would conclude the public testimony for SB 308 and closed the teleconference portion of the meeting. A Recess was taken at this time. CS FOR SENATE BILL NO. 203(CRA): An Act relating to police protection service areas in unified municipalities; and to police protection provided by the state in certain municipal areas. Co-chair Pearce announced that SB 203 was before the committee. Senator Rieger spoke to the history that led to the introduction of SB 203. He said in the 1970s, Anchorage areas were combined into a municipality with a charter. There was some mistrust that had formed in this situation. Senator Kerttula offered information regarding fist and second class boroughs and how the options for services had been handled. Senator Rieger agreed that was a fair assessment. He went on to say that there were some areas that had limited services. One of the services that had been become a real issue was police protection. Because of the nature or cost of the service, south Anchorage had voted against police coverage. Because of that issue, it was perceived that south Anchorage was unwilling to pay for police protection. However, 90 percent of the residents surveyed had said they were willing to pay and gave their preference for troopers. He said that SB 203 would allow the residents of south Anchorage to vote to pay for police protection. Discussion was had by Senators Kelly, Rieger and Kerttula regarding the situation. Senator Kelly maintained that the bill should mandate that south Anchorage pay for police protection. Senator Rieger disagreed that south Anchorage would refuse to pay. He stated that the Anchorage Police Department was more costly than the troopers. Co-chair Pearce announced that the meeting would include testimony from Anchorage via teleconference. DAN MOORE, represented the Mayor's office of Anchorage and said that Kevin O'Leary, Police Chief and Duane Udman were also present. He said the Mayor and the police department of Anchorage strongly opposed SB 203. The Mayor felt the bill was bad law and would put both the police department and the Alaska State troopers in a bad position for providing service to the Hillside area. Instead, this community should be given a local option of having police service mandated area wide. Currently, there was one service area that provided police service to all the 20,000 residents of Anchorage. End SFC-93 #63, Side 1 Begin SFC-93 #63, Side 2 Mr. Moore felt SB 203 was the wrong approach and not an effective or equitable means of providing police service. He felt that statutory language should be created to give the local governing body the option of requiring police service to be paid by all Anchorage residents. In answer to Senator Kerttula, Mr. Moore said that Rabbit Creek would be part of the area that would be asked to pay for police protection. RICHARD WEINIG, trial attorney, testified from Anchorage in support of SB 203. He said the issue was statewide need versus municipal greed. He noted the letter from the City of Sitka that said SB 203 would require uniformed police protection throughout Sitka. He said that he paid for police protection each time he paid for groceries or other services. In answer to Senator Kelly's statement that there was no sales tax in Anchorage, he reiterated that increased prices paid for real estate property taxes. Co-chair Pearce, as a rebuttal to his statement that those areas in Anchorage had voted against paying for police protection, asked Mr. Weinig if he thought it would be a good idea if citizens would be able to vote on not paying for property taxes. Co-chair Pearce agreed with Senator Kerttula that Police Chief O'Leary was well respected and had a good reputation. Senator Kelly requested a statement from the Department of Public Safety. Co-chair Pearce invited C.E. Swackhammer to the table. C.E. SWACKHAMMER, Deputy Commissioner, Department of Public Safety, testified in opposition to SB 203. He said the department was opposed to paying for State Troopers within an incorporated municipality that had police powers. Senator Kerttula said he respected Mr. Swackhammer's comments. He asked if services would be duplicated if SB 203 would pass. Mr. Swackhammer said the department would continue trooper services in Girdwood and state highway patrols and did not foresee reducing trooper services in that area depending upon budget funding. Senator Rieger stated that SB 203 would provide more resources to the troopers' budget. Senator Kelly reminded the committee that the funds would go directly into the general fund. Senator Rieger agreed that all program receipts went into the general fund and it was up to the legislature to direct those funds. Senator Kelly said he was going to ask the municipality of Anchorage which bill they preferred, the CS for SB 203 or no bill at all. DAN MORGAN, spoke on behalf of the Mayor, via teleconference from Anchorage, that they preferred no bill at all. Senator Kelly asked that the bill be held in committee. Co-chair Pearce, in response to the narrator in Anchorage, said that there was not enough time to hear several others that were present to testify. Co-chair Pearce announced that SB 203 would HELD in committee. SENATE BILL NO. 368: An Act relating to the human services community matching grant program; and providing for an effective date. Co-chair Pearce announced that SB 368 was before the committee. Senator Sharp said that in 1992, a statutory basis was established for the Human Services Community Matching Grant Program. This program required an increasing match rate over the next three years from 1992 forward. It was to begin in FY94 with a 10 percent match rate and increased each fiscal year with the maximum 50 percent match starting in FY96 and continuing at that level for the life of the program as funded. He went on to say that SB 368 would reduce the maximum match rate from 50 percent to 30 percent for the future. This would bring the Human Services Community Matching Grant program in line with other programs that require matching funds such as the Capital Matching Grant Program and others that require a match. Non-profit human services organizations would benefit in the long run because the reduced local match rate would help insure the municipalities continued participation in the program. With the ongoing reduction in state and municipal assistance revenue sharing and resulting cost shifting to local governments, he thought it was important to encourage the two largest urban areas to continue providing more human services at the local level. He felt it would facilitate the continuation of the human service grants being used to service the needs of those two areas. In answer to Co-chair Pearce, Senator Sharp said SB 368 did not address the decision by the department to reduce the amount of money to Anchorage and increase the amount to Fairbanks. He said that it was required to be split by a per capita basis and did not know what had decided allocation amounts. Senator Rieger MOVED for passage of SB 368 from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with a "do pass," and a zero fiscal note for the Department of Health & Social Services. Co-chairs Pearce and Frank, Senators Rieger and Sharp signed "do pass." Senator Kerttula signed "no recommendation." ADJOURNMENT The meeting was adjourned at approximately 11:00 a.m.