CS FOR SENATE BILL NO. 207(L&C) "An Act relating to the membership on the board of directors of the Alaska Aerospace Development Corporation." AT EASE 10:09:10 AM / 10:10:00 AM This was the first hearing for this bill in the Senate Finance Committee. DOUG LETCH, Staff to Senator Gary Stevens, the bill's sponsor, explained that this bill would increase the Alaska Aerospace Development Corporation (AADC) Board of Directors membership from nine to 11 members. In addition, it would specify that three of the 11 members must reside on Kodiak Island, which is the area in which AADC launch activities occur. Mr. Letch informed the Committee that the current nine member Board is comprised of three State residents "who have significant high level experience in private business sector, specializing in finance, economic development or marketing". Current Board membership also includes the University of Alaska President or his designee, the University of Alaska Geophysical Institute director or his designee, the Department of Commerce, Community and Economic Development Commissioner or his designee, "two members who have held or currently hold a position in the aerospace industry or have special experience with federal regulatory procedures or policies involving space or operational experience", and a public school educator or public member. Mr. Letch stated that the fact that none of the seats are currently dedicated to a Kodiak Island Borough resident is one of the reasons that this bill was introduced. Mr. Letch noted that AADC has conducted "numerous rocket launch construction projects and other activities" at its Kodiak Launch Complex (KLC) since the late 1990s. The activities impact local government activities, businesses, recreational activities, as well as the economy. KLC is also an integral component of the nation's missile defense system. Mr. Letch remarked that the bill's sponsor has determined that local representation on the AADC Board is important. This legislation is supported by the City of Kodiak and the Kodiak Island Borough, which has developed a Resolution [copy on file] reflecting their support. 10:12:37 AM Co-Chair Green asked the history of Kodiak Island residents' participation on the Board. Mr. Letch noted that up until the previous year, two Kodiak Island residents were on the Board; currently there is only one. That person is Dave Woodruff, a successful fish cannery operator and member of the City Council. The other individual was also a successful businessman who resigned for personal reasons. A person who did not reside in Kodiak replaced him. 10:13:23 AM Senator Stedman supported "the concept of having local representation" on such Boards; however, he asked whether the requirement that a Board member must possess "a high level of experience" might pose a problem; in other words, a limited qualified applicant pool might be available for a vacant seat on the Board. 10:14:09 AM Mr. Letch pointed out that a person from Kodiak could hold the Board seat specified for either a member of the public or a public school educator. Island inhabitants would attest that there "are plenty of qualified people there, and that it would never be an issue." Co-Chair Green asked whether the public educator seat being referenced is the seat designated in Section 1(a)(6) on page 2, line 9. Mr. Letch affirmed. A Kodiak Island resident could be appointed to the public school educator or public member seat designated in Section 1(a)(6). Co-Chair Green countered that the three Kodiak Island resident memberships being proposed would appear to be included in the language in CS SB 207(L&C) Version 24-LS1208\Y, Section 1(a)(1) page 1, line 8 through 12. This language reads as follows. (1) five [THREE] state residents who have a significant high level of experience in the private business sector, specializing in financing or economic development or marketing; three of the state residents appointed under this paragraph shall be residents of the borough where the launch activities of the corporation occur; New Text Underlined [DELETED TEXT BRACKETED] Co-Chair Green suggested that the Board member designations could be specified and then language allowing three Kodiak Island residents to qualify for any of the seats could be included. Mr. Letch voiced his approval of that suggestion. It would be further reviewed. Senator Dyson understood that, at times, the Kodiak Launch site has been utilized by the federal Department of Defense (DoD). To that point, he asked whether the AADC Board has authority specific to management decisions about how the facility could be used and which clients could use it. Mr. Letch, while deferring to the Department of Commerce, Community and Economic Development, stated that the Board "serves in a variety of capacities as a standard board with advisory capacities and also decision making capacities". 10:19:09 AM Senator Dyson worried that the Board might desire to preclude clients such as the DoD who might use the site "for very strategic national defense issues". SALLY SADDLER, Legislative Liaison, Department of Commerce, Community and Economic Development replied that she could not adequately respond to the concern until she conducted further research. Co-Chair Green noted that Mark Hamilton, AADC Board Member and President of the University of Alaska was on teleconference and might be able to answer Senator Dyson's question. 10:20:25 AM MARK HAMILTON, Chair, Alaska Aerospace Development Corporation Board and President, University of Alaska, testified via teleconference from an offnet site. "The Board has the responsibility of discovering the qualifications of a launch partner, and they are very specifically technical, and there's, as you might expect, a very very extensive contract drawn up with each customer. No one has dibs on the range, no one is a certain customer until considered by the Board." 10:21:16 AM Senator Dyson stated that the response "raises questions", as it could be interpreted to mean that the Board could decide to deny DoD from utilizing "the facility for national defense purposes". President Hamilton responded that such a decision would be "an extraordinary circumstance". President Hamilton communicated that the current contractual agreement would require DoD to provide the Board "a very specific timeline if they had a project which required a specific reaction, there would be contractual obligations on their part." Continuing, he noted that were "commercial customers to suddenly appear in the numbers that, frankly, were envisioned 12 years ago where you had the potential of an Iridium Corporation launching and refreshing as many as 600 satellites," the Board might make the "difficult corporate decision" to deny a DoD request that did not pertain "to a dire national need." The Board would desire to accommodate commercial opportunities "rather than holding the range open for whenever" DoD decided to use it. Senator Dyson assumed that the Board's mission would include consideration of regional environmental concerns, the impact of activities on both offshore and onshore areas, the safety of the local residents, and the financial stability of the Corporation. However, he was concerned that "a philosophical anti-war anti- national bent of the Board could restrict U.S. defense efforts." 10:22:13 AM President Hamilton responded that were the Board "prudently staffed with people who have that kind of a bias, that that would certainly be a risk." He opined that that "is not the case of the existing Board or any Board membership that I have been associated with to date". The concerns about the site's impact on Kodiak are absolutely paramount with the Board, as substantiated by the fact that just about "every single thing that is done out there" is scrutinized. The position of the people who live on Kodiak Island has been a known factor as a result of the fact that there has traditionally been voting Island representation on the Board. In addition, non-voting elected officials, including members of the Legislature, have represented the interests of the Island. In addition, the majority of the Board meetings are held in public forums. The Board conducts a great deal of effort on issues. Senator Dyson acknowledged. 10:23:39 AM Co-Chair Wilken voiced appreciation for President Hamilton's comments about Legislative participation on the Board, as he has served for several years on the Board as a representative of the Senate. Co-Chair Wilken assured the Committee that, historically, a Legislator representing the Kodiak Island District has been a non- voting member of the Board. Co-Chair Wilken asked whether there is "a sense that the voice of Kodiak has been squelched and therefore we need to increase the membership." 10:24:56 AM Mr. Letch declared that Co-Chair Wilken's comments "hit the nail on the head." While Legislators representing the District have continued to serve in "an ex officio capacity" on the Board, there have historically been two Kodiak Island resident voting members on the Board. It is unknown as to "whether this was by design or happenstances". The AADC facility has become "a lightning rod" to the community in that people watch "every move that AADC makes." Some people oppose the decisions made by AADC and others support them. The site has become an important economic factor on the Island. 10:25:52 AM Mr. Letch stated that the decisions made by AADC do affect the community, and the people in Kodiak "feel that" incorporating the two voting Board membership requirement would best represent their interests. 10:26:26 AM Co-Chair Wilken voiced concern that adoption of this legislation might result in there being requests for geographic representation on other boards. No other board currently has such specification. Adoption of this legislation would also specify that more than 25 percent of the Board would be representing one area. His concern could be likened to that professed earlier by Senator Dyson in that, while this might be acceptable today, in the future this action "may lessen the use of that rocket range for whatever reason." Co-Chair Wilken voiced concern about "the precedent" that might be established. As a result of this legislation, "there could be four people at the table speaking on behalf of Kodiak." He believed that "Kodiak is well-represented … the people of Kodiak have not been ignored at all; to the contrary, I suggest that they've been heard and reheard." While some people might not support the activities that occur at the site, "the vast majority would agree that the rocket range is a benefit" both to the area and to Alaska. In summary, he could not support the legislation as it might lead to geographical representation as opposed to qualifications dictating board membership. "If it isn't broke don't fix it." 10:28:30 AM Senator Dyson spoke in support of Co-Chair Wilken comments. The Kodiak Launch site is a major launch site that is "very strategic … to our national interests." 10:29:31 AM Senator Olson asked whether some controversial issue of importance to Kodiak Island residents was defeated at some point, due to a lack of votes on behalf of the local people. 10:29:50 AM Mr. Letch was unaware of "any specific instance." 10:30:01 AM President Hamilton stated that the membership of the Board as currently designated is appropriate, and he did not support the proposed changes. The Legislators who have represented the interests of Kodiak on the Board have done a good job. The Board is also aware of its responsibilities. The individual from Kodiak who resigned from the Board did so because his business "was being boycotted". The involvement of politics with private activities could explain the failure of governmental corporations. The Board has discussed a variety of membership issues including whether or not the University President or the Director of the Geophysical Institute of the University should be on the Board. While he understood the reason those entities were designated when the AADC Board was initially developed 12 years prior, changes that have occurred over time might dictate that there should be fewer rather than more specific Board member designations. The reason for including the Commissioner of Department of Commerce, Community and Economic Development and someone who understands the aerospace industry on the Board could be substantiated; however, it would be difficult for him to substantiate the reason "at this stage of the game" for requiring that the University of Alaska President or a representative of the Geophysical Institute to be on the Board. "This ought to be a commercial board" comprised of people who could move a corporation forward. 10:33:38 AM Senator Hoffman inquired as to how often and where the Board meets. Mr. Hamilton replied that while the Board primarily meets quarterly in Anchorage, there would be a meeting in Kodiak in June 2006. Co-Chair Green ordered the bill HELD in Committee.