ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 3, 2012
1:05 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Alan Dick
Representative Neal Foster
Representative Bob Herron
Representative Cathy Engstrom Munoz
Representative Berta Gardner
Representative Scott Kawasaki
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Sharon Cissna
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 26
Urging federal agencies to work with the Alaska Department of
Fish and Game, Southeast Alaska Native leaders, and other
interested parties to establish strategies and plans for the
sustainable management of the reintroduced sea otter population
of Southeast Alaska.
- HEARD & HELD
HOUSE BILL NO. 276
"An Act providing for a credit against the oil and gas
production tax for costs incurred in drilling certain oil or
natural gas exploration wells in the Nenana Basin."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR 26
SHORT TITLE: SEA OTTER MANAGEMENT
SPONSOR(s): REPRESENTATIVE(s) P.WILSON
03/31/11 (H) READ THE FIRST TIME - REFERRALS
03/31/11 (H) RES
02/03/12 (H) RES AT 1:00 PM BARNES 124
BILL: HB 276
SHORT TITLE: OIL/GAS PRODUCTION TAX CREDITS: NENANA
SPONSOR(s): REPRESENTATIVE(s) THOMPSON, DICK, MILLETT, TUCK,
MILLER
01/17/12 (H) PREFILE RELEASED 1/13/12
01/17/12 (H) READ THE FIRST TIME - REFERRALS
01/17/12 (H) RES, FIN
01/30/12 (H) RES AT 1:00 PM BARNES 124
01/30/12 (H) Heard & Held
01/30/12 (H) MINUTE(RES)
02/01/12 (H) RES AT 1:00 PM BARNES 124
02/01/12 (H) Heard & Held
02/01/12 (H) MINUTE(RES)
02/03/12 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
ARTHUR MARTIN, Intern
Representative Peggy Wilson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HJR 26 on behalf of the prime
sponsor, Representative P. Wilson.
ROSITA WORL, PhD, Chair
Federal Indian Policy Committee
Alaska Federation of Natives (AFN)
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26.
EDWARD THOMAS, President
Central Council of Tlingit and Haida Indian Tribes of Alaska
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26.
CARRIE SYKES, Manager
Business and Economic Development Department
Central Council of Tlingit and Haida Indian Tribes of Alaska
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26.
KIRK HARDCASTLE
Commercial Fisherman
Juneau, Alaska
POSITION STATEMENT: Testified on HJR 26.
PHIL DOHERTY, Executive Director
Southeast Alaska Regional Dive Fisheries Association
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of HJR 26.
DENNIS WATSON, Mayor
City of Craig
Craig, Alaska
POSITION STATEMENT: Testified in support of HJR 26.
JAMES ANDERSON
Craig, Alaska
POSITION STATEMENT: Testified on HJR 26.
WILLIAM C. BARRON, Director
Division of Oil & Gas
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 276, discussed the
process of exploration licenses, leases, and units, and answered
questions regarding state incentives.
ACTION NARRATIVE
1:05:54 PM
CO-CHAIR ERIC FEIGE called the House Resources Standing
Committee meeting to order at 1:05 p.m. Representatives Munoz,
Gardner, Foster, Seaton, and Feige were present at the call to
order. Representatives Dick, Kawasaki, P. Wilson, and Herron
arrived as the meeting was in progress. Representative Cissna
was also present.
HJR 26-SEA OTTER MANAGEMENT
1:06:28 PM
CO-CHAIR FEIGE announced that the first order of business would
be HOUSE JOINT RESOLUTION NO. 26, Urging federal agencies to
work with the Alaska Department of Fish and Game, Southeast
Alaska Native leaders, and other interested parties to establish
strategies and plans for the sustainable management of the
reintroduced sea otter population of Southeast Alaska.
1:06:57 PM
ARTHUR MARTIN, Intern, Representative Peggy Wilson, Alaska State
Legislature, on behalf of Representative P. Wilson, prime
sponsor, reviewed the differences between the original bill and
the proposed committee substitute (CS), Version 27-LS0717\B,
Bullard, 1/27/12. He explained that Version B would update the
third whereas clause on page 1 as follows [new text underlined,
deleted text bracketed] [original punctuation provided]:
WHEREAS more than 10,560 [5,800] sea otters were
observed in 2003, and a 2010-2011 [2010] aerial survey
by the United States Fish and Wildlife Service
revealed 20,000 [more than 11,000] sea otters, for an
approximate annual growth rate of 12 percent in
southern Southeast Alaska and four percent in northern
Southeast Alaska [13 percent]; and
1:08:14 PM
MR. MARTIN testified that HJR 26 would "encourage the U.S.
Secretary of the Interior and other appropriate federal agencies
to work with Alaska Department of Fish & Game, Southeast
Alaska's Native leaders, and other interested parties in the
state to establish strategies and plans for sustainable, long-
term management of the reintroduced sea otter populations of
Southeast Alaska." He said the resolution would also "encourage
federal authorities to consider broadening the scope of
allowable uses of sea otters taken for subsistence purposes to
include the use, transfer, and sale of intact sea otter pelts."
MR. MARTIN next provided a history of sea otter populations,
stating that sea otters almost disappeared completely from North
America due to commercial harvesting between the 18th and 20th
centuries. This led to protection of the species under the
Marine Mammal Protection Act, which transferred management of
sea otters from the State of Alaska to the U.S. Fish and
Wildlife Service. Sea otters were reintroduced into Southeast
Alaska from 1965 to 1969 so that the protected mammals would
reach an optimal sustainable population range. The U.S. Fish
and Wildlife Service created a management plan in 1994 that was
to be reviewed annually, revised at least every three to five
years, and modified subject to new findings, changes in species
status, policy changes, or congressional direction. However, he
said that during his research he could not locate any revisions
since that original plan of 18 years ago.
1:10:06 PM
MR. MARTIN explained that today sea otters have rebounded
because of a general harvesting moratorium set by the U.S. Fish
and Wildlife Service, with exception being Alaska Natives. Sea
otter numbers are rising at an estimated 10-12 percent a year,
with last year's count being approximately 20,000 sea otters,
and [a projected] 28,000 animals in three years. These
population increases have become a serious issue of concern to
commercial and subsistence fishing because of competition
between the sea otters and local residents for the resources.
Although sea otters are among the smallest of marine mammals
they are the largest of the North American weasel family; male
sea otters in Alaska may exceed 100 pounds. Sea otters have no
blubber for warmth so they must constantly eat, consuming up to
23 percent of their body weight daily in crab, abalone, sea
urchins, sea cucumbers, clams, and other shellfish that humans
rely upon for commercial and subsistence uses.
MR. MARTIN said that altogether sea otters consume approximately
253,000 pounds of food per day, which translates into a loss of
commercial and subsistence fisheries in Alaska. According to a
[November] 2011 report by the McDowell Group [entitled "Sea
Otter Impacts on Commercial Fisheries in Southeast Alaska"], sea
otter predation on red sea cucumber, geoduck clam, red sea
urchin, and Dungeness crab fisheries have directly and
indirectly cost the Southeast Alaska economy $28.3 million since
1995. He maintained that the exponential growth of sea otter
populations is directly linked with the demise of recreational
and commercial Dungeness crab fisheries in Orca Inlet and
eastern Prince William Sound. Over a dozen fishery harvest
areas in Southeast Alaska have been closed down or negatively
affected by sea otters, he said.
1:12:13 PM
MR. MARTIN noted that under the 1972 Marine Mammal Protection
Act, Alaska Natives are denied the customary and traditional
right to sell intact sea otter pelts to non-Natives. Now that
the reintroduced sea otter populations in Southeast Alaska are
healthy and growing, it is time that the Native peoples are
given back their customary and traditional right, he said. This
would continue to grow their cultural heritage, as well as help
maintain ecological balance while expanding their economic
opportunity.
MR. MARTIN said the passage of HJR 26 would serve the dual
purpose of encouraging a renewed discussion on the possibility
of state management of sea otters, as well as a renewed
discussion on the use, transfer, and sale of intact sea otter
pelts. He maintained that this would help Southeast Alaska's
municipalities, towns, and villages as they face substantial
challenges in developing broader economic opportunities for
their residents. He said HJR 26 would send a strong message to
federal authorities that a new management structure is
desperately needed to manage Southeast Alaska sea otter
populations. Additionally, the resolution would also serve as a
redress to Native people's customary and traditional right to
use, transfer, and sell intact sea otter pelts.
1:13:45 PM
REPRESENTATIVE HERRON asked what the thought process was in the
late 1960s to re-introduce sea otters without a management plan.
MR. MARTIN reiterated that commercial harvesting in the 18th,
19th, and 20th centuries nearly wiped out sea otters. He
related that prior to arrival of the Russians an estimated one
million sea otters were along the North American continent. An
international agreement in 1911 protected sea otters and in the
1960s the plan was to reintroduce them into their former
regions. The 1972 Marine Mammal Protection Act transferred sea
otter management from the state to the federal government. He
said he does not know whether the state had a plan. However,
once management was transferred to the federal government it was
the federal government's responsibility to come up with a plan,
which it did in 1994, but the plan was not very specific.
REPRESENTATIVE MUNOZ inquired whether there is any scientific
evidence that ties declining herring stocks to sea otter
predation.
MR. MARTIN responded that he did not know.
1:16:19 PM
REPRESENTATIVE GARDNER asked what the role of sea otters is in a
healthy marine ecosystem. For example, when there were a
million sea otters prior to the Russians, were there healthy
populations of crabs, geoducks, abalone, and other mollusks. In
regard to the customary and traditional rights of Natives to use
intact sea otter pelts, she inquired about the exemptions under
current law and how those would change if the goal of HJR 26 is
achieved.
MR. MARTIN replied that there has been a link with sea otters
benefitting the ecological environment. Many people attribute
sea otter populations to helping the kelp forest by eating sea
urchins which eat kelp. However, sea otter populations have now
grown exponentially and have become a detriment because they are
eating all the resources and once the resources are gone in one
region the otters move to another. Their populations have now
grown to such a level that they are impacting the economy and
hurting the ecological system.
1:19:03 PM
REPRESENTATIVE GARDNER asked whether there were healthy
populations of the sea life on which sea otters prey back when
there were one million otters and the Russians had yet to
arrive. She further asked what the current number of sea otters
is in Alaskan waters.
MR. MARTIN related that the 1994 report by the U.S. Fish and
Wildlife Service, as well as the McDowell report, briefly
mention that the dive fisheries and the crab fisheries were not
as big as they are now, so sea urchins, geoducks, sea cucumbers,
and crabs had about 100 years in which to rebound. He related
that the McDowell report states that, at this point, if sea
otter numbers keep increasing, humans and sea otters will be
unable to co-exist because the sea otters will devour all the
commercial fisheries and then move on.
1:21:02 PM
REPRESENTATIVE GARDNER said her question is whether things were
in balance back when there were a million sea otters in Alaska.
If there are fewer sea otters today, then why are they having a
greater impact on their food species, she asked.
MR. MARTIN responded that the question relates back to optimal
population range, which was discussed in the 1994 conservation
plan. The optimal sustainable population (OSP) level refers to
the number of animals which result in the maximum productivity
of the population of the species, keeping in mind the carrying
capacity of the habitat and the health of the ecosystem. Sea
otters have gone beyond that point, he said. He deferred to
other witnesses to further answer the question.
REPRESENTATIVE GARDNER said she is still looking for an
understanding of the carrying capacity and the numbers today.
She reiterated her question about the exemptions to indigenous
peoples for pelts and harvesting and how those would change if
the resolution were to achieve its ultimate goal.
MR. MARTIN answered that if HJR 26 were to pass it would
hopefully start a discussion among the appropriate state and
federal agencies and Alaska Natives to come up with a better
management plan and see whether Alaska Natives want to expand
their ability to sell intact sea otter pelts to non-Natives.
This would go back to the management plan for sea otter
populations. The resolution would start a dialogue more than
anything else.
1:23:33 PM
REPRESENTATIVE KAWASAKI inquired whether annual reviews of the
1994 management plan, and revisions at least every three to five
years, have happened.
MR. MARTIN responded that it has not been happening as far as he
knows from his investigation. While research has occurred by
different organizations, including state and federal
departments, there has been no revision of the original plan.
REPRESENTATIVE KAWASAKI observed that HJR 26 does not
necessarily ask for any significant changes to the policy,
rather it urges the U.S. Secretary of Interior to work under the
confines of what is already current law under the conservation
management plan. He asked whether the sponsor is actually
asking for something different or asking that [the federal
government] work with [the state].
MR. MARTIN said the purpose of HJR 26 is to re-engage a serious
discussion with the state on sea otter management in Southeast
Alaska. There seems to be a disconnect with the U.S. Fish and
Wildlife Service managing the sea otters; sea otters are
unmanaged at this point because they are growing at such a
tremendous rate. The resolution is asking for a sit-down
between the state, federal government, and other interested
parties to discuss what can be done to resolve this issue.
1:25:42 PM
REPRESENTATIVE KAWASAKI said it is unclear whether the
resolution is asking that the State of Alaska become the manager
of sea otters. He asked whether this is what the sponsor wants
to have happen.
MR. MARTIN replied "no, that is not what this resolution is
asking," although having the state take over management is a
possibility. The resolution is only asking to engage in a more
serious dialogue between the appropriate people on this issue.
MR. MARTIN, in response to Co-Chair Feige, confirmed that he is
an intern for Representative P. Wilson. He said he is studying
political science, with a minor in Russian, at the University of
Alaska Fairbanks and originally moved from the former Soviet
Union to Prince of Wales Island in 1997. He added that actually
experiencing the political process is much better than reading
about it in a book.
1:27:39 PM
REPRESENTATIVE HERRON moved to adopt the proposed committee
substitute (CS) for HJR 26, Version 27-LS0717\B, Bullard,
1/27/12, as the working document. There being no objection,
Version B was before the committee.
CO-CHAIR FEIGE opened public testimony on HJR 26.
1:28:39 PM
ROSITA WORL, PhD, Chair, Federal Indian Policy Committee, Alaska
Federation of Natives (AFN), explained that she is speaking on
behalf of AFN, but that she wears multiple hats. She said she
is also vice chair of the Sealaska Corporation board of
directors and president of the Sealaska Heritage Institute, both
of which have a very direct interest in the sea otter issue.
She noted that [Alaska Natives] have been aware of the
increasing sea otter population and its impact on the resources.
In regard to Representative Gardner's question, Dr. Worl said
that at the time when there were a million sea otter there was
only an indigenous population using the otters for traditional
purposes; there were no commercial fisheries or commercial
enterprises. Right now, Alaska Natives know that the [sea
otter] population is having an impact on both commercial and
subsistence resources. When AFN became aware of this through
discussions with its villagers it attempted to act to see what
it could do.
1:30:52 PM
DR. WORL related that the Marine Mammal Protection Act, as it
now stands, allows for Alaska Natives to take marine mammals and
use them for customary purposes for subsistence, as well as the
selling of traditional arts and crafts products. At issue is
what is traditional and what is customary. For example, an
Alaska Native made a teddy bear and was cited for it not being
traditional. So, AFN has been trying to advance legislation,
which was received with mixed emotions in the Native community
because of the fear that opening the Marine Mammal Protection
Act might change the exemption/protection for Alaska Natives.
However, AFN feels that the inability to make contemporary items
is causing problems because a number of Alaska Natives have been
cited. She said AFN has complained vigorously about enforcement
practices and has advanced ideas of co-management.
1:32:18 PM
DR. WORL continued, stating that AFN's idea was really to change
the Marine Mammal Protection Act to allow for the sale of
contemporary items. She shared that the Sitka Tribe of Alaska
(STA) started a marine mammal tannery that includes sea otter.
She added that Sealaska Heritage Institute started holding skin
sewing workshops because this is seen as an opportunity to
develop economies in Alaska Native villages, and Sealaska has
started a subsidiary corporation directed at promoting village
economies. Sea otters are seen as one possible answer to
promote sustainable economies in Alaska Native communities.
DR. WORL pointed out that the "marine mammal commission" has
worked for some time to advance the notion of co-management.
There is reference to that in the Marine Mammal Protection Act,
she said, but it is a long process. Because of the impact on
other resources, the hope is that developing village economies
around marine mammal skin sewing classes will be part of the
answer. She said AFN has met with the Alaska Department of Fish
& Game about its ideas and AFN has a proposal to the legislature
where it would continue its work in sponsoring skin sewing
classes.
1:34:47 PM
DR. WORL stated that AFN thinks there are many good things
included in HJR 26. However, the whereas clause related to the
sale of pelts is objectionable and AFN opposes it. The language
is not clear in specifying who could purchase the pelts. Right
now Alaska Natives can sell pelts to other Natives. If the
language in HJR 26 is to allow for the sale of pelts to non-
Natives, the AFN would oppose that because of the impact it
would have on village economies. Such language would likely
also generate considerable opposition from animal rights groups.
She said AFN does not support letting the population expand and
then collapse, rather it supports sustainable harvest.
DR. WORL informed committee members that AFN is the statewide
Native organization, representing approximately 16 percent of
the population of Alaska, or 200 villages, 13 regional
corporations, and 12 non-profit corporations. She said a
resolution adopted at AFN's 2011 convention opposes any kind of
change to the Native exemption in the Marine Mammal Protection
Act and opposes the sale of pelts to non-Natives. She
reiterated that AFN would oppose any provision in HJR 26 that
would allow the sale of pelts to non-Natives.
1:37:22 PM
REPRESENTATIVE GARDNER inquired whether AFN would oppose the
whole resolution if the one clause promoted the sale of pelts to
non-Natives.
DR. WORL replied that the resolution is good in its intent but
for that one clause.
REPRESENTATIVE MUNOZ asked whether [AFN] would oppose the sale
of pelts to non-Natives in small rural Alaska villages.
DR. WORL responded yes. She added that AFN supports maintaining
the Native exemption language as it is in the Marine Mammal
Protection Act.
CO-CHAIR FEIGE inquired whether the sale is limited to Alaska
Natives or Southeast Natives.
DR. WORL understood that it is limited to Alaska Natives.
CO-CHAIR FEIGE further inquired whether that is Alaska Natives
anywhere.
DR. WORL answered that she knows a person must live on the coast
to be eligible to harvest sea otters, but Native people anywhere
can purchase sea otter.
1:39:02 PM
CO-CHAIR FEIGE said he thinks that is what HJR 26 states, other
than he does not think it puts a limitation on to who the pelts
can be sold. He perceived AFN's intent as being to keep a
supply of sea otter pelts that Natives can turn into value-added
products for sale for making a livelihood.
DR. WORL replied yes.
CO-CHAIR FEIGE asked whether there is the capacity to utilize
all the pelts that would be taken under a management plan. For
example, a management plan could call for more sea otters to be
taken than Alaska Natives could process. He further asked
whether surplus pelts could be stored.
DR. WORL responded that someone may be testifying about this.
She said the STA tannery has been expanded and other tanneries
are being developed, and there are tanneries in Anchorage that
can accommodate this. Sealaska has looked at having facilities
to freeze excess pelts until they could be tanned. She stressed
that [AFN] absolutely supports sustainable harvest and if there
was an immediate increase in sea otter harvest it would run
afoul of people who would like to oppose any kind of marketing
of it. So [AFN] is trying to work on this in a way that will
protect Alaska Natives and protect Alaska Native communities and
the development of this cottage industry.
1:41:21 PM
CO-CHAIR FEIGE surmised that a gradual ramping up of sea otter
take would be something that would be worked out in the
negotiation of the management plan so that it would match the
increase in capacity for utilizing the pelts.
DR. WORL agreed that it would be a ramp up, but said it could
also be selective. She related that in AFN's discussions with
the Alaska Department of Fish & Game, AFN has proposed that the
department identify areas for Alaska Natives to target for
harvest.
1:42:17 PM
REPRESENTATIVE DICK commented that conversation about local
economies may be premature because the real goal of HJR 26 is
just to start a conversation and the tail end of that discussion
is what is being discussed right now. He said that whatever
would be most powerful in getting the conversation started is
the most important thing that should be said.
DR. WORL said AFN has tried that in its discussions with the
Alaska Department of Fish & Game, the U.S. Department of
Interior, the U.S. Department of Agriculture, and the Alaska
delegation about the problems and addressing those problems.
REPRESENTATIVE HERRON complimented Dr. Worl by sharing that
people in his area consider her to be an Elder. He then asked
what the views are of AFN and Dr. Worl on the meat of sea
otters.
DR. WORL answered that she does not know that AFN has addressed
that, but the marine mammal commission may be working on that.
She added that the marine mammal commission has been the entity
doing all of the work on this for 10 years or more.
REPRESENTATIVE HERRON suggested that this should be part of the
discussion because there is the potential that large quantities
of edible meat will need to be managed as well.
DR. WORL agreed to ask about this.
1:44:25 PM
CO-CHAIR SEATON inquired whether AFN's objection could be
resolved by eliminating on page 4, line 1, the language
"transfer, and sale of intact sea otter pelts" and inserting in
its place "for contemporary items".
DR. WORL responded that she does not have a copy of Version B,
but AFN's concern is the sale of intact sea otter pelts and it
is not clear whether that is limited to Native or non-Native.
CO-CHAIR SEATON surmised that if there is currently the ability
to sell pelts to Natives, then this does not need to be taken
care of for AFN's concern. However, he understood that AFN
wants to ensure that contemporary items are covered.
DR. WORL said AFN has been advancing to Alaska's delegation a
clarification that Natives can sell contemporary items.
1:45:50 PM
REPRESENTATIVE FOSTER commented that while the overall goal is
to manage the sea otter population, he thinks that the impacts
on the Alaska Native community in terms of being able to
reintroduce and encourage cultural practices, and the impacts
that that could have on the youth, would have impacts on
everything, including the issue of suicide. He said he is very
much in support of the work that AFN is doing on this issue.
DR. WORL agreed about the impacts. She said she just completed
a study on the status of Alaska Native women and one thing she
found is that there are very limited economic opportunities in
the villages and that is accompanied by social problems. Some
of those social problems can be alleviated by people having
healthy lifestyles and the ability for sustaining themselves.
1:47:29 PM
EDWARD THOMAS, President, Central Council of Tlingit and Haida
Indian Tribes of Alaska, first offered his appreciation for the
resolution. While there are portions that need clarity and some
that the council outright opposes, he said the idea of the State
of Alaska, the federal government, and the tribes working
together to manage a very important resource is a good thing.
He related that he is from Craig and happened to be living there
when sea otters were reintroduced. At that time the management
plan was not clear as to whether the sea otters were available
for Natives or non-Natives. However, as the Marine Mammal
Protection Act became refined over time, the harvest of sea
otters became part of the act for Alaska Native utilization.
That is an important component to the act, he stressed, and when
that part of the act is talked about, the central council wants
to make sure that the purpose of that act is because the
indigenous populations relied on those resources from the
beginning of time and it was important to the policy makers to
continue that practice.
1:49:31 PM
MR. THOMAS said the resolution does a good job articulating the
resource and its growth as well as the problems that are created
with the overpopulation. When looking at the problem, it must
be understood that when the Marine Mammal Protection Act put
forth the regulations and requirements it was very restrictive
on what the pelts could be converted into to be considered part
of Native tradition, not realizing that today's people are also
creating traditions. The practices of Alaska Native people now
are Alaska Native practices, he pointed out, and these practices
are not necessarily 100 percent the way they were at contact
with the Russians. For example, at the time of Russian contact
there was no commercialization of crab or bottom fisheries, so
the Alaska Native utilization of those resources was much
different. But as time moved forward, Alaska Natives became
involved in those fisheries; people utilized those fisheries
because the ability to gather them changed. Likewise, the
utilization of pelts has also changed, and the interaction
between Alaska Natives and other people for the value of those
pelts has changed.
1:51:24 PM
MR. THOMAS related that Alaska Native artisans are not so
worried about selling a pelt to somebody in Juneau, Anchorage,
or even Seattle. The biggest threat is that if Alaska Natives
were allowed to sell those pelts unaltered they would come back
as authentic Native crafts made in Taiwan, as can be seen by
looking at Juneau's South Franklin Street. That is just the
nature of the way it works, he said, if places can be found
where people can make them much more efficiently and cheaper
with different methodologies, then that is where they will end
up coming from. It is very important to preserve not just an
Alaska rural economy, but the economy as it is, and that is the
primary reason why the central council is very concerned about
selling pelts without being very clear on how they will be
utilized. The central council does not want to have a mass exit
of these resources and then have them come back to Alaska for
sale.
1:52:50 PM
MR. THOMAS, regarding sea otter management, said he believes
there could be broadened utilization of sea otter pelts,
provided there is a loosening up of the words that are being
used as traditional or authentic. A product made by a Native
today and sold for tourism is authentic, he said, whether it is
a totem pole, vest, or other clothing. However, the Marine
Mammal Protection Act narrows it down as to how it must be done
and applies certain other conditions, such as being something
that was made way back when. Referring to the teddy bear
incident mentioned by Dr. Worl, he said nothing in Native
society says that Alaska Natives never made teddy bears. When
he was a youngster, a house would be built for a person that
died and the person's belongings would be put in the casket and
in the house. If it was a child that died, products were made
by family members and put into the house where the child was
buried. Many things were not seen as Alaska Natives made the
transition to contemporary society; a lot of those things may
have existed and there are signs that they did exist prior to
contemporary times.
1:54:19 PM
MR. THOMAS continued his discussion about loosening up the words
by providing an example. If an artisan was able to use a sea
otter pelt to make a vest with a zipper it would be authentic,
but it would not be considered traditional because it does not
meet the criteria. It goes without saying that Alaska Natives
made blankets out of skin pelts, but if trying to abide by the
Marine Mammal Protection Act that would have to be proved
somehow. Since his grandparents did not use sea otter pelts to
make blankets, it is hard for a person like him to prove it.
1:55:34 PM
MR. THOMAS said he believes that if Alaska Natives were able to
do more things with the pelts locally that there would be more
incentive to create tanneries and more incentives for people to
do something with the by-products. However, with the limited
access and limited utilization, the problem remains. By working
with the scientific community the House Resources Standing
Committee can help Alaska Natives work through the maze of
federal regulations so that there can be better utilization of
those resources locally as well as control the population so it
makes sense to the people utilizing the resources being consumed
by the sea otter.
1:57:09 PM
CARRIE SYKES, Manager, Business and Economic Development
Department, Central Council of Tlingit and Haida Indian Tribes
of Alaska, noted that she has been sewing sea otter pelts since
about 1990, so she is very familiar with what is involved with
the processes. She related that last March the U.S. Fish and
Wildlife Service sponsored a workshop in Sitka for the southeast
tribes; about 12 communities were represented at the meeting.
The workshop was sponsored because of the need for information
and education. The tribes were not clear about what the Marine
Mammal Protection Act allowed for them and were fearful of
harvesting because of past enforcement issues that happened to
other tribal members. A lot of issues were brought up, but the
biggest issue is that there needs to be government-to-government
consultation between the U.S. Fish and Wildlife Service and the
local tribes so that the tribes can work on management in their
local areas. It is important to the tribes to have input on
what is happening in their region. That was started in 2011,
but the person with the U.S. Fish and Wildlife Service changed
jobs so the position is currently vacant. At an economic
development workshop held this past December, the service was
urged to fill this vacant position and it is now looking at re-
starting the government-to-government consultation.
1:59:14 PM
MS. SYKES, regarding the enforcement issues, reiterated that
tribal members are fearful about harvesting without some clearer
definitions about what is significantly altered. She conveyed
that a recent letter from the U.S. Fish and Wildlife Service
includes draft language about significantly altered, and the
central council is very happy to see that there has been an
effort to start to define that in regulation so people have a
clear understanding of what is allowable and what is not
allowable.
MS. SYKES addressed the question of what is authentic. She said
the central council's position is that if it is made by a Native
it is authentic. Additionally, the central council considers a
killed and tanned hide to be significantly altered. There is
much need for education and outreach, particularly when there
are groups that oppose any harm to sea otters and do not
understand the impacts to the shellfish and subsistence foods.
There needs to be education and outreach on what is allowed by
the Marine Mammal Protection Act.
2:00:23 PM
MS. SYKES said that while there is opportunity for economic
development, there are lots of needs, such as training for how
to sew the skins and how to skin the hides, more facilities for
tanning, opportunities for marketing, and coordinating with
others such as bartering the hunters.
MS. SYKES added that, according to the hunters, sea otter meat
is not edible. Regarding customary and traditional use, she
said it is documented that over 200 years ago sea otters were
used in the raven's tail weaving and those robes are in Russia
and other places around the world.
2:02:19 PM
REPRESENTATIVE FOSTER inquired whether under the Marine Mammal
Protection Act the burden of proof is on the Alaska Native to
prove that something is traditional and customary or is the
burden of proof on the U.S. Fish and Wildlife Service to show
that something is not traditional and customary.
MR. THOMAS replied that there is very little burden of proof;
the agency utilizes traditional from its own perception and that
is what creates the problem. This makes people very nervous
because the fines for violating the act are extensive. When a
regulator or other person in a high position interprets
something different than did the Alaska Native, then that person
is in trouble. While the U.S. Fish and Wildlife Service will be
coming out with proposed definitions of what significantly
altered means, it is a little late for a person like himself.
He said he believes that whether something is authentic is more
important than what significantly altered means to the U.S. Fish
and Wildlife Service. It sounds like splitting hairs, be said,
but it isn't. If it is defined properly it will allow people to
utilize the resource better.
REPRESENTATIVE FOSTER said he wanted to make sure that Natives
are not being required to provide a picture from 200 years ago.
MR. THOMAS added that there is some truth to what Representative
Foster is saying, because from the perspective of the U.S. Fish
and Wildlife Service, if it is not in a museum somewhere or seen
somewhere then it is probably not traditional use.
2:04:55 PM
REPRESENTATIVE MUNOZ asked how the cases of the previously
mentioned people were resolved, given that it is the U.S. Fish
and Wildlife Service that defines what is acceptable.
MS. SYKES said she knows that in the past it has been left up to
the U.S. Fish and Wildlife Service, and that has made everyone
fearful. However, the agency recently sent out a letter
requesting tribal consultation and input on its new definition
and the comment period ends the end of March.
REPRESENTATIVE MUNOZ inquired whether the artists that were
cited have paid a fine and are continuing.
MS. SYKES responded that she knows artists from Ketchikan who
had hides seized three years and are still waiting. In the case
of one of those artists, the hides were tagged correctly, but
the artist did not have the paperwork from 15 years before, so
the hides were taken. Yet, the U.S. Fish and Wildlife Service
did not have its own paperwork and still took the hides.
Another case is a young man who did not keep up on his paperwork
and is getting ready to go to prison. This artist sold to a
non-Native and his claim is that he was tricked. When selling a
hide is an artist supposed to request proof of whether someone
is Native; there again is that burden of proof and where things
are unclear.
2:07:04 PM
REPRESENTATIVE MUNOZ asked whether the citations are coming from
local U.S. Fish and Wildlife Service employees.
MS. SYKES understood that there are two arms of the U.S. Fish
and Wildlife Service - a management arm out of Anchorage and the
enforcement people in Washington, DC. She said she thinks it is
the local officers who do the citing, but it is actually handled
through Washington, DC. It was brought up at the workshop that
the agency wants Alaska Natives to harvest, but that citing
people does not make them want to go harvest.
REPRESENTATIVE DICK said this is exactly the point that he was
trying to make last year with his wood bison legislation. He
did not want the subsistence people in his district to find
themselves litigants.
2:09:05 PM
KIRK HARDCASTLE, Commercial Fisherman, emphasized that
commercial fishing is the stabilizing economic influence for the
entire state of Alaska. He said that he is an entrepreneur, a
businessman, and understanding the role that the sea otter has
in all of the fisheries in Southeast Alaska is absolutely
essential. He said he studied marine biology and environmental
physiology in college and was born and raised around sea otters.
The sea otter is a keystone species; a keystone being something
that holds the whole arc together. Commercial fishing is a
keystone economic influence for the state of Alaska.
2:10:43 PM
MR. HARDCASTLE explained that sea urchins and abalones make up
the majority of the sea otter diet. Sea urchins and abalones
are grazers, eating the kelp that grows on rocks. Sea otters
keep urchins and other grazers in check so that there is a kelp
forest. Kelp provides the rearing grounds for all of the
commercial fisheries species; for example crab, shellfish,
salmon, halibut, and cod. All of those juvenile species must
live in the kelp forest before they move to the outer waters. A
tiny juvenile fish does not have protection from larger
predators, but a kelp forest is like the entanglement of a net
so that large predators cannot get in. When [young] salmon
leave the inland water systems for the open ocean waters, they
hide and live within those kelp forests. Crab have several
different morphic stages, and each of those different stages may
live in mud, or rocks, or open ocean, but all crab at one stage
in their life live in these kelp forests. The major economic
value of sea otters is that they provide rearing grounds for all
of the fishing industries.
2:12:39 PM
MR. HARDCASTLE said sea otters may be cute, but they are mean
and he has been bitten several times. The McDowell report talks
about the impacts of [sea otter] predation. However, no one has
looked at what the economic impact would be if sea otter numbers
were to rise. For example, more kelp means more rearing
grounds, more rearing grounds means more availability for
juvenile species to make it to the outer ocean and then come
back and increase the pocketbooks of fishermen. Southeast
Alaskans rely on these species for subsistence and commercial
value. The more kelp, the more fish, but no one has done a
report on the benefits of having otters and greater kelp forests
in Southeast Alaska. He related that in northern California
where the sea otter population has come back, a rebound has been
seen in all the other species because there is a protected area
to hide in.
2:14:10 PM
MR. HARDCASTLE refuted the statements made about sea otters
devouring every resource and hurting the ecological system. He
said numerous papers show that to be false. Otters benefit, not
hurt, the ecological system. As to devouring every resource,
graphs in the McDowell report and a memorandum [in the committee
packets] show that sea otters do not devour every resource.
Only 5-7 percent of sea otter diet is comprised of commercial
shellfish, 95 percent is non-commercially harvested animals.
MR. HARDCASTLE shared that he is on an Alaska Department of Fish
& Game advisory committee and has been involved in the sea otter
issue for quite some time, in addition to growing up with
otters. He added that sea otters are a federal species, not
state species. While he does not need to be around sea otters
himself, he does understand the economic value of sea otters to
the tourism industry throughout Southeast Alaska. He pointed
out that the unintended consequences of keeping sea otters alive
or dead has not been studied. As a commercial fisherman, he
emphasized how important it is that there is a large sea otter
population so that there are healthy kelp forest systems for all
the fisheries.
2:16:14 PM
REPRESENTATIVE GARDNER inquired what the other 95 percent is of
the sea otter's diet.
MR. HARDCASTLE replied that according to the McDowell report 52
percent is clams followed by other echinoderms, fish, mollusks,
scallops, sand lance, geoducks, shrimp, tanner crab, red
urchins, cucumbers, barnacles, and unidentified prey. Non-
commercial crabs make up almost 95 percent of sea otter diet,
and eliminating that 5 percent would impact 100 percent of the
fisheries in Southeast Alaska. Healthy kelp forests are needed.
These kelp forests are primarily in the outside waters, not
inside waters. Sea otters are not moving to the inside because
they do not live where there is no kelp. Sea otters have no
blubber and do not float very well, so they need to wrap
themselves in kelp to keep afloat. Higher sea otter populations
could benefit all the fisheries in the long run.
2:18:33 PM
REPRESENTATIVE MUNOZ asked about the state of kelp forests today
and whether there is any tie-in with the increase in sea otter
population.
MR. HARDCASTLE responded he did not study that in Southeast
Alaska because he has been involved in fisheries. However, in
marine biology it is common knowledge that the diet of sea
otters is urchins and abalones. If otters are eliminated, then
there would need to be a massive urchin harvest industry to
maintain the growth of the kelp forests. He predicted that such
a massive industry would require laborers coming from Asia.
2:19:47 PM
REPRESENTATIVE P. WILSON read from page 8 of the McDowell
report, last paragraph, first sentence, which states: "Other
studies tend to support the notion that sea otters are
opportunistic generalists which adapt their predation to their
environment." She said there are sea otters living in the
Wrangell harbor and she sees them all the time because her house
is located in the harbor. She said sea otters are not like some
species that will move on after all of their favored prey is
eaten in an area. Sea otters are very adaptable, so once their
favorite species is gone they will go to their next favorite,
and so on, and do not move out of an area until there is very
little left. In the meantime the industries being talked about
here are being affected now and a big difference is being seen
now in these areas. She said she is not saying to get rid of
sea otters, rather the hope is that Alaska Natives can do what
they have traditionally done for years and harvest the otters
and make the skins into things that make money. Keeping the
harvest only to Alaska Natives will not result in overharvest.
CO-CHAIR FEIGE added that the point of HJR 26 is advocating for
a management plan of some kind, not exterminating the species.
REPRESENTATIVE P. WILSON agreed.
2:23:20 PM
PHIL DOHERTY, Executive Director, Southeast Alaska Regional Dive
Fisheries Association, disagreed with Mr. Hardcastle's
statements pertaining to Southeast Alaska, and said it his
association's point of view that when sea otter populations are
increasing, millions and millions of dollars' worth of harvest
potential are lost. There is little doubt, he continued, that
where there were sea otters there are [now] no sea urchins, no
geoduck clams, and no sea cucumbers, as those are the first
species to go. According to the chart for sea otter diet, he
related, 38 percent is sea urchins, a harvestable species to his
association; 10 percent is geoducks; and 4 percent is sea
cucumbers. The problem with that study, he said, is that it was
done in areas that otters had inhabited for many years, so the
sea cucumbers and sea urchins were basically gone. He offered
his belief that the University of Alaska study shows that as sea
otters move into new areas the first things that go are the sea
urchins, sea cucumbers, and geoducks, and then the otters will
eat more undesirable food sources like hard-shell clams. Sea
otters impact the association's fisheries; for example, the
Alaska Department of Fish & Game has closed down 14 areas to sea
cucumber fisheries because of sea otter predation.
2:25:56 PM
MR. DOHERTY further pointed out that the geoduck clam guideline
harvest levels have been cut by hundreds of thousands of pounds
and next year another 150,000 pounds of guideline harvest level
will be lost. In yesterday's opening, he continued, geoduck
clams fetched $22 a pound according to the Alaska Department of
Fish & Game. The department's latest assessment of red sea
urchins found that there was five million pounds less sea
urchins in Southeast Alaskan than a few years ago and the
department attributed that directly to sea otter predation.
While he realized that the resolution would encourage and
increase the harvest of sea otters as an economic benefit to the
Southeast Alaska Native community, he said it would probably not
be enough to really affect the impacts on the association's
commercial fishing. However, he added, it is a step in the
right direction and the association fully supports HJR 26.
2:26:48 PM
MR. DOHERTY related that over past two to three years the City
of Ketchikan, the Borough of Ketchikan, the City of Petersburg,
the Prince of Wales economic impact group, the town of Kake, the
Petersburg Vessel Owners Association, the Southeast Alaska
Fishermen's [Alliance], United Fishermen [of Alaska], the
Southeast [Alaska] Regional Advisory [Council], and the Central
Council Tlingit Haida have all written resolutions that sea
otters in Southeast Alaska should be managed. Therefore,
Representative P. Wilson does not stand alone on this issue. He
said that over the last three years he has met with the U.S.
Fish and Wildlife Service numerous times, attended numerous
meetings of the Alaska Department of Fish & Game, and met with
other organizations and they all understand and realize the
impacts that sea otters are having on Southeast Alaska
commercial and subsistence fisheries. He urged the committee to
support HJR 26 and to encourage the State of Alaska to keep the
pressure on the U.S. Fish and Wildlife Service in terms of the
Marine Mammal Protection Act and coming up with a feasible
management plan for sea otters in Southeast Alaska.
2:28:57 PM
DENNIS WATSON, Mayor, City of Craig, said he disagrees with Mr.
Hardcastle's comments and is testifying in support of HJR 26.
He said he is a 38-year resident of Craig and has been a
commercial fisherman since his arrival. For 16 of those years,
up until last year, he worked at a commercial dive fishing
operation harvesting sea cucumbers. During his first 15 years
in this area sea [otters] were a rare sight and he was amused by
them. By the mid-1980s large numbers of otter became common
sight around southern Southeast Alaska. Now it is a rare
occasion that a place can be found where an otter is not seen.
He even sees them as far out as 20 miles offshore where he
trolls. During his time in the dive fishery, he spent about
1,000 hours watching the bottom of the ocean via a camera while
surveying for cucumbers. At first it was amusing to watch sea
otters because they are quite efficient and smart creatures.
But after a while he began to realize that once sea otters got
into an area they quickly devastated the species in that area
and then moved on. In his experience, the feeding cycle begins
with the easy-access shellfish and sea urchins in the intertidal
areas; when these species are depleted the sea otters move into
deeper water where they work on horse clams, geoducks, sea
cucumbers, and crabs until just about all the edible species are
gone; and in the end they eat the starfish.
2:31:13 PM
MAYOR WATSON said that what is left after the sea otters move
out, as seen from his camera, is big deep holes in the bottom
that were dug by the otters while chasing after clams and other
species. When the otters move on the only thing left are those
big holes - no starfish, no urchins, no anything. Many of these
species are important to subsistence users and commercial
harvesters. This year the dive fishery in the Craig area is
projected to have around a $20 million ex-vessel value, which is
huge, especially in small villages where there is virtually no
economy in the fall and winter months. Last year in Craig alone
the geoduck harvest provided a payroll of $10 million, excluding
processors, shippers, and other support services. It is a big
economy for Craig and it is at a time of the year when there is
nothing else to do. Sea otters do not have any predators that
take very many of them, so something needs to be done to keep
their numbers in balance with the rest of the ecology of the
region.
2:33:21 PM
MAYOR WATSON added that he has heard from the U.S. Fish and
Wildlife Service that it is unknown how many sea otters were
[originally] in Southeast Alaska, and there could be way more
now than there was at any point in history. Humans have had a
hand in depleting sea otters and in bringing them back, he
continued, and man needs to move in and manage these creatures.
He said his understanding from talking with a man who did a PhD
dissertation on this subject, is that sea otters were
reintroduced in this area to re-create the commercial harvest of
otters. The management plan was going to be to trap them, but
the Marine Mammal Protection Act cut that short. He offered his
hope that Alaska Natives can be allowed to take more sea otters
with less of a problem. He shared that some people in his area
have gotten into really hot water over what was thought to be
very, very minor violations. His community would like to see
this cleaned up and would like to see a better management plan.
REPRESENTATIVE GARDNER inquired what a natural predator of sea
otters is, aside from man.
MAYOR WATSON replied that up north killer whales really like sea
otters, but the killer whales in his area are fish eaters.
2:35:29 PM
JAMES ANDERSON explained that sea otters are really rich because
they eat so much shellfish and are inedible no matter how they
are cooked, which is why Native people have never eaten them.
He jokingly suggested doing studies on what could be made for
dog food. He maintained that there will not be a dive fishery
if sea otters continue as they are. When a group of several
hundred sea otter come into an area, there is nothing left on
the bottom once they are done, even the starfish cannot survive
and nothing is able to reproduce. Regarding what Alaska Natives
can and cannot do with sea otters boils down to entrapment, he
said. For example, a man he works with was talked into selling
hides to an undercover agent.
MR. ANDERSON noted that years ago Alaska Natives killed things
with a stick, but as time went on the methods changed. Native
lives are always changing all the time, he said, and so are
Native traditions and artwork and this change needs to be
considered. The restrictions need to be lightened up for the
Natives so they can work with the sea otters. After a sea otter
is shot, trying to figure out how to legally get from a skin to
a product to sell without getting into trouble almost requires a
college degree, and this problem needs to be addressed. He said
he would like to start a tannery in Craig but has had problems
getting grants. If the workers had to be Native, he could put
Native families to work on Prince of Wales where there is a lot
of sea otter that would last a long time if managed right. He
urged that the issue be studied and that there be a lightening
up for people to use the resource.
REPRESENTATIVE DICK agreed with Mr. Anderson that Native culture
is always evolving. He said there is an image of Native culture
as being fixed in time like a snapshot, when in reality
throughout millennia it has been a movie.
2:40:25 PM
CO-CHAIR FEIGE kept public testimony open and held over HJR 26.
MR. ANDERSON added that he would like to see his community's
dive fishery continue on. As a teenager he was able to pick up
abalone on the beach, but he has not had an abalone in over 20
years between divers and sea otters. However, if things are
managed right, everyone could have some of it. He said he does
not want the sea otters decimated, just managed.
HB 276-OIL/GAS PRODUCTION TAX CREDITS: NENANA
2:41:32 PM
CO-CHAIR FEIGE announced that the next order of business would
be HOUSE BILL NO. 276, "An Act providing for a credit against
the oil and gas production tax for costs incurred in drilling
certain oil or natural gas exploration wells in the Nenana
Basin." [Before the committee was Version M, the proposed
committee substitute (CS) labeled 27-LS1193\M, Bullock, 1/18/12,
adopted on 1/30/12.]
CO-CHAIR FEIGE said Mr. Bill Barron participated in a recent
discussion between the co-chairs and their staff regarding the
issues around oil and gas exploration credits and incentives
associated with HB 276 and that Mr. Barron will be addressing
the committee. Co-Chair Feige explained that the proposed bill
would put forward some Cook Inlet-style credits by incentivizing
the first, second, and third exploration drill holes in the
Nenana Basin. At the same time, there is the question of
whether other exploration incentives should be considered and
whether this bill could serve as a template for other basins in
addition to the Nenana Basin.
2:43:19 PM
WILLIAM C. BARRON, Director, Division of Oil & Gas, Department
of Natural Resources, stated that providing incentives for
exploration in remote areas is probably something that needs to
be considered very strongly. Currently, only a handful of areas
in the state have had much of any exploration and even fewer
have had development. He said that part of the aforementioned
discussion was about the process of exploration licenses,
leases, and units.
MR. BARRON explained that for the areas of the state and state
lands that are not part of the existing area-wide lease sale
program, there is the opportunity to establish exploration
licenses. If a party or parties want to explore in a certain
area, they can come to the state and nominate the land and the
area for that license. The state would then conduct a best
interest finding (BIF) for that area, which takes about two
years. Upon completion of that finding, the state would open up
that area for a competitive bid process for its exploration
license term. The license is granted on a dollar commitment
rather than a work commitment. The term of the license is
typically 10 years. During that timeframe the party or parties
awarded the license are required to expend 25 percent of their
commitment within the first four years, but have the remainder
of the term to spend the rest of their money. At the end of the
license term, the land or any portion of the land that was part
of the license can be extended into a lease, at which time the
state would gain $3 per acre lease fees for the designated area.
The five- to ten-year term of the lease is negotiated between
the state and the party or parties, and is typically ten years.
During that timeframe the parties are encouraged to do
additional exploration work, driving the property closer and
closer toward development and production.
2:46:35 PM
MR. BARRON addressed what happens if there is a failure at
either the license period or the lease period, a failure meaning
that nothing is found or nothing worth continuing the work is
found. On the license side, the property is just returned to
the state. On the lease side, if work is not done the property
is returned to the state after the lease period. If there is a
success - someone drills a discovery well and proves hydrocarbon
and proves closure - a unit is then formed, which is done in
conjunction with the Department of Natural Resources (DNR).
Forming a unit secures the land for an additional term,
typically five years, unless the property is developed and
producing and then it is on until the property no longer
produces hydrocarbon. He said the reason he wanted to make the
distinctions between a license, a lease, and a unit, is because
there are very definite timeframes, processes, and procedures
that the state follows for everyone's protection in terms of the
property, the land, and the resource development.
MR. BARRON, regarding the proposed language he has seen to date,
said he thinks that the credits need to be for state lands and
probably for Native land as well. Federal property is a whole
different issue. He maintained that properties for this type of
tax credit should exclude the lands that are currently in the
area-wide lease sale because those areas already have a very
robust process, credits, tax programs, and so forth. He said
his understanding of HB 276 is that it is intended to encourage
exploration activities in areas that have never really been
explored before.
2:49:16 PM
CO-CHAIR FEIGE, in regard to including Native corporation lands
along with state lands, asked how Alaska Mental Health Trust
lands and private mineral holdings should be handled.
MR. BARRON replied he would have to give that more thought. In
concept, they could be rolled in in the same manner. There are
some subtleties relative to Native land, he added. At this
juncture there would need to be some very clear definition of
the acquisition of information and data and sharing that data
either to the state or publicly. Right now that is not the
typical format for Native land exploration; that information is
typically not made public. So, that would have to be adjusted
in some manner if the intent is to encourage exploration and the
intent is for the state to gain data and then share that data
with other parties.
2:50:20 PM
CO-CHAIR FEIGE inquired what an appropriate timeframe would be
for release of that data when moving from an exploration license
to a lease.
MR. BARRON said that in a license a single group has exclusivity
for 10 years. Having that data made available before then is
really of no value to anybody, unless for the securing of those
credits the party agrees that the license term be shortened.
For example, if the statute reads that to be eligible for the
credit seismic data is released to the public in four years,
then the license term should also be truncated along those lines
for the reason being that people would want to be able to use
that data to encourage more exploration. If the license is
truncated, then there needs to be an immediate move toward
leasing of that area for the protection of the party that did
the work. There needs to be a strike of balance between
releasing the data and ensuring that the parties that have taken
a risk are also balanced with their ability to retain rights to
do more exploration during the leasing program.
CO-CHAIR FEIGE understood Mr. Barron to be saying that if a
party is given four years for an exploration license, then that
party should have first rights on leases before the expiration
and before the data is made public.
MR. BARRON answered that that would be one way to look at it.
2:52:36 PM
CO-CHAIR SEATON recollected that in testimony the other day the
party with the license said that it did not mind releasing the
data early because it had the license. He asked whether Mr.
Barron has a different position.
MR. BARRON replied not necessarily. The party that made that
claim might have that opinion; another party might have an
issue. He said he does not have a counter opinion.
Intuitively, if a party has a 10-year license and that license
is then rolled to a lease, at which time the party has another
10 years, releasing the data probably does no harm. However,
there is the question that if there are areas within that
general area where seismic data is secured by one party, another
party might interpret that data differently or see something
that the first party did not see or understand. So, there is a
balance in terms of when the data is made public and the
unintended consequences to a player that strode up first.
CO-CHAIR SEATON commented that the state is heavily investing in
that project because it wants to get development and that might
help get development that is outside of the leased or licensed
area. It would be a choice that the party applying to the state
for the credit could make.
MR. BARRON agreed that that would be their choice.
2:54:43 PM
REPRESENTATIVE FOSTER noted that the committee is also looking
at the possibility of whether a template could be set up so that
this could be applied to other basins in addition to Nenana
Basin. He related that there has been some interest in
including credits for Kotzebue Basin and Norton Sound Basin. He
related that Mr. Bob Swenson of the Division of Geological &
Geophysical Surveys said that there is nothing significant
enough for even local use and this would mean having to look to
offshore. He asked how far out the federal offshore waters are.
MR. BARRON responded that state water is up to three miles.
REPRESENTATIVE FOSTER requested Mr. Barron to expand on possible
options for encouraging exploration in federal waters.
MR. BARRON answered that the federal outer continental shelf
(OCS) program is a program all to its own and he would have to
think about how to involve state credits in a federal program
where there are not the same mechanisms for return of the
state's investment.
2:56:35 PM
REPRESENTATIVE MUNOZ inquired whether Mr. Barron thinks the
approach of legislating one basin at a time is best or should a
bill like this be a template.
MR. BARRON replied the conundrum is that having a template is a
good idea, but trying to figure out where to target those in
specific areas might actually be a deferral of the activity.
Even though there are some reasonably good ideas for guiding the
state in terms of where those areas should be, having it one
step at a time might actually encourage the exploration rather
than delay it, whereas it is delayed because it had to be
thought about too much. Areas that are known might be included
early and as more is learned programs could be added.
2:57:59 PM
CO-CHAIR FEIGE presented a hypothetical example of incentivizing
a seismic job where something promising is found, an exploratory
well is then drilled, and then another to delineate a find, and
something is found that is potentially developable. The party
goes through the process of wells, facilities, transportation of
the product to market and now the party is making money. By way
of subsidization the state has invested a significant dollar
amount at this point. He asked whether it would be seen as an
incentive or disincentive that the party taking the credits is
obligated to pay back a certain amount until the state's
investment is paid back.
MR. BARRON responded that the payback requirement is very
typical of what is in the Cook Inlet sale. He said he does not
know that he would make any adjustment. In philosophy, what
[the committee] is trying do is reasonable, just as the current
Cook Inlet bill is reasonable in asking for that return.
CO-CHAIR FEIGE inquired whether, in addition to the jack-up rig,
there are other payback requirements in other parts of that
particular body of law.
MR. BARRON said not that he recalls, but he would defer to the
Department of Revenue to provide a more clear response.
3:00:19 PM
CO-CHAIR FEIGE, at the request of Co-Chair Seaton, related that
the co-chairs have discussed that these projects are essentially
broken into phases: data collection, exploratory well,
production, and commercialization. As a prerequisite for
receiving a state subsidy the co-chairs feel it is appropriate
in between each of these phases for the Department of Natural
Resources and all its divisions to have some say as a check and
balance, rather than rash commercialization utilizing state
money. He asked whether Mr. Barron feels the department can
handle that and has the expertise to handle that or would it
need to be contracted out. He further asked whether Mr. Barron
thinks that that would be an appropriate mechanism.
MR. BARRON replied that right now he will not necessarily
address the manpower requirements and whether the department
would do that in-house or contract it out. He said he thinks
that having that pre-qualification meeting and setting the
standards of location and direction and goals and objectives is
very critical in this process. It is very important for the
state, if it is going to be issuing these credits, to have that
discussion up front and early and everybody agree with what the
targets are.
[HB 276 was held over.]
3:02:44 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:03 p.m.