SB 3002-STRANDED GAS AMENDMENTS  JIM CLARK, Chief Negotiator, Office of the Governor, said that he wanted to talk about the Stranded Gas Amendments that are before the committee. CHAIR SEEKINS asked if he meant SB 3002. MR. CLARK replied yes. He explained that the administration hopes to incorporate what they learn during the public comment period with the will of the committee and the thoughts of the administration to formulate a more comprehensive Committee Substitute. 10:46:39 AM JIM BALDWIN, Outside Counsel, Department of Law, briefly described sections 1-5 of SB 3002. Section 1 contains an amendment to the purpose clause of the Stranded Gas Act, to remove a provision that would restrict the state's ability to propose terms related to the taxation of oil. MR. BALDWIN explained that Section 2 creates the fiscal structure to receive municipal impact funds [$125 million in municipal impact funds]. It relates to how the money is received into the state treasury and how it is made available for appropriation by the legislature. Sections 3,4, and 5 are amendments that were proposed during the second special session and were the product of recommendations received from the Municipal Advisory Group. He said that the state also needs conforming amendments to the Stranded Gas Act in order to make the contract provisions consistent with the SGDA. 10:50:55 AM Some of the subject matter included in the version that DOL introduced during the last special session related to the interaction of the contract with other agreements that are in effect by law. 10:52:08 AM CHAIR SEEKINS said that his intent is to hold the bill and work on it after the committee returns on July 24. MR. CLARK noted that he hopes to come back to the committee at that time with ideas on how this might be fashioned in a way that is consistent with what the committee has already done. CHAIR SEEKINS commented that they would probably discuss project labor agreements. MR. CLARK said that is another point the governor raised in his speech and an issue they will be discussing as they put the contract together. He pointed out that the fiscal agreement with the producers is not the right spot for a project labor agreement; the entity that will enter into that agreement will be the LLC, and the appropriate person(s) to undertake the negotiations are the contractors to the LLC. 10:55:23 AM CHAIR SEEKINS said the Alaska hire features in the Stranded Gas Act are very important to members of the Legislature and to the governor. 10:55:56 AM SENATOR WILKEN referred to a memo from Phillip C. Gildan of Greenberg Traurig, dated July 13, with his initial reaction to SB 3002, and suggested that might be a place to start when the committee returns on July 24. He asked Mr. Clark when the LLC might be available, as he does not see how the contract can proceed until they have seen the entity agreements. MR. CLARK replied that the administration thinks the LLC is long overdue, and that he will be talking to the producers about that. 10:59:16 AM CHAIR SEEKINS said he also has concerns about the integration clause in the contract. This contract requires legislative approval in order for the administration to execute it; but according to the reading of an attorney in Fairbanks, once it has been executed it can be amended without legislative approval. 11:00:22 AM MR. CLARK replied that he would make sure that is clarified. He feels that there are things in the contract the executive body ought to be able to change, but there are also key functions, like tax rates, that the executive body should not be able to change without legislative approval. At ease 11:01:42 AM to 11:02:25 AM SENATOR WILKEN asked Mr. Griffin if the committee is supposed to get an update on the Lukens study [Market Analysis and Alaska Price Model by Lukens Energy Group, October 26, 2004] on gas prices and capacity management issues. MR. GRIFFIN replied yes, he will check on that and report back.