ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 15, 2012
1:10 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Bob Herron
Representative Cathy Engstrom Munoz
Representative Berta Gardner
Representative Scott Kawasaki
MEMBERS ABSENT
Representative Alan Dick
Representative Neal Foster
COMMITTEE CALENDAR
HOUSE BILL NO. 229
"An Act relating to activities, including violations and
penalties, under the supervision of the Big Game Commercial
Services Board."
- HEARD & HELD
HOUSE BILL NO. 280
"An Act providing for a credit against the oil and gas
production tax for costs incurred in drilling certain oil and
gas exploration wells in the Kotzebue basin or the Selawik
basin; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 229
SHORT TITLE: BIG GAME COMMERCIAL SERVICES BOARD
SPONSOR(s): REPRESENTATIVE(s) FEIGE
04/06/11 (H) READ THE FIRST TIME - REFERRALS
04/06/11 (H) RES, JUD
04/08/11 (H) RES AT 1:00 PM BARNES 124
04/08/11 (H) Heard & Held
04/08/11 (H) MINUTE(RES)
02/15/12 (H) RES AT 1:00 PM BARNES 124
BILL: HB 280
SHORT TITLE: OIL & GAS TAX CREDITS: KOTEZBUE/SELAWIK
SPONSOR(s): REPRESENTATIVE(s) JOULE
01/17/12 (H) READ THE FIRST TIME - REFERRALS
01/17/12 (H) RES, FIN
02/15/12 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
MICHAEL PASCHALL, Staff
Representative Eric Feige
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 229 on behalf of the prime
sponsor, Representative Feige.
JOE WANT, Registered Guide
Fairbanks, Alaska
POSITION STATEMENT: Expressed concerns with HB 229.
WADE WILLIS
Resident Hunter
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 229.
THOR STACEY
Alaska Professional Hunters Association (APHA)
Juneau, Alaska
POSITION STATEMENT: Testified in support to HB 229.
PAUL JOHNSON, Chair
Big Game Commercial Services Board
Elfin Cove, Alaska
POSITION STATEMENT: Expressed hope that HB 229 would be
forwarded from committee.
BRODIE ANDERSON, Staff
Representative Reggie Joule
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 280 on behalf of the prime
sponsor, Representative Joule.
LANCE KILVAGUIQ MILLER, PhD, Vice President - Resources
NANA Regional Corporation, Inc.
Kotzebue, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation during
the hearing on HB 280.
ELIZABETH SAAGULIK HENSLEY, JD
Corporate & Public Policy Liaison
NANA Regional Corporation
Kotzebue, Alaska
POSITION STATEMENT: During the hearing of HB 280, provided
comments.
ACTION NARRATIVE
1:10:37 PM
CO-CHAIR ERIC FEIGE called the House Resources Standing
Committee meeting to order at 1:10 p.m. Representatives Herron,
Munoz, P. Wilson, Seaton, and Feige were present at the call to
order. Representatives Gardner and Kawasaki arrived as the
meeting was in progress.
HB 229-BIG GAME COMMERCIAL SERVICES BOARD
1:10:59 PM
CO-CHAIR FEIGE announced that the first order of business would
be HOUSE BILL NO. 229, "An Act relating to activities, including
violations and penalties, under the supervision of the Big Game
Commercial Services Board."
1:11:56 PM
CO-CHAIR SEATON moved to adopt CSHB 229, Version 27-LS0764\I,
Bullard, 2/13/12, as the working document. There being no
objection, Version I was before the committee.
1:12:19 PM
MICHAEL PASCHALL, Staff, Representative Eric Feige, Alaska State
Legislature, on behalf of Representative Feige, prime sponsor,
informed the committee that the changes [encompassed in Version
I] address the questions by the committee last year as well as
questions that developed over time. The hope, he related, is to
provide legislation that addresses the concerns of the Big Game
Commercial Services Board while allowing it to operate in an
efficient and effective manner in terms of regulating the big
game guiding industry. He then pointed out that the committee
packet includes a sectional analysis of Version I. Section 1
provides additional authority to the Big Game Commercial
Services Board to promulgate regulations to administer the
regulation of big game guides. Existing statute specifies that
the board is limited to regulations that are "required" under
statute. The Big Game Commercial Services Board has been
advised by the Department of Law that it can't promulgate
regulations that aren't required in statute. Therefore, the
language in Section 1 simply provides the board with a broader
authority to adopt regulations. Section 2 creates a provision
in statute for a retired master guide-outfitter license that
recognizes those who have earned such a license, for which one
pays a one-time fee. Such a license allows the individual to
retain the title but the license holder wouldn't be able to
function as a guide or provide guide services. Mr. Paschall
likened this provision to that of a physician being able to say
that he/she is a medical physician although he/she has retired
and no longer practices. Section 3 has clarifying language that
specifies a guide-outfitter may provide the services of a class-
A assistant guide under employment with a contracting guide-
outfitter. Therefore, it essentially allows [a guide-outfitter]
to work at a lower level for another guide-outfitter. Section 5
merely inserts a provision in statute that allows the Big Game
Commercial Services Board to suspend or revoke licenses of
guides engaged in conduct involving unprofessionalism, moral
turpitude, or gross immorality. He then turned to Section 6,
which addresses penalties in existing statute. The concern of
the board was that if someone made a procedural error in
processing paperwork and violated a game law in the process
current statute requires the judge to suspend the license when
the individual is convicted of such a violation. Therefore,
Section 6 changes the language such that for such [procedural]
violations, the court could choose to suspend a license rather
than having to order a suspension. Section 7 merely authorizes
the department to establish a fee for the new retired master
guide-outfitter license. The final section, Section 8, is
conforming language to specify that the holder of a retired
master guide-outfitter license may not guide.
1:16:34 PM
CO-CHAIR SEATON pointed out that on page 3, line 4, the language
"the court may order" is used whereas on page 3, lines 8 and 12,
the language "the court shall order" is used. He inquired as to
the difference between the provisions.
MR. PASCHALL answered that it's based upon the severity of the
offense. For example, wasting game is obviously a serious
offense and in that case "the court shall" suspend the license
whereas for other more minor violations the court is afforded
discretion with the use of the language "the court may". In
further response to Co-Chair Seaton, Mr. Paschall confirmed that
the offenses referred to on page 3, lines 4-7 are minor offenses
while those referred to on page 3, lines 8-15 are more severe
offenses. For example, guiding without a license or guiding
while a license is suspended or revoked results in the court
having to order a further relocation or suspension of the
license versus providing the court an option.
1:18:36 PM
REPRESENTATIVE HERRON inquired as to the need for a retired
status master guide license.
MR. PASCHALL clarified that it's nothing more than a recognition
for the years, which he recalled is 25 years, someone has put
into this profession.
1:19:33 PM
REPRESENTATIVE HERRON, referring to Section 5 that provides the
opportunity for the board to suspend or revoke a guide's
license, asked if the practice of hunting a drainage until there
are no more animals is considered to be unprofessional.
MR. PASCHALL said he isn't qualified to speak to the practices
in the field since he isn't a professional guide. However, in
discussions with the board he has understood the concern to be
regarding if someone engaged in an activity that is considered
unprofessional, such as shooting a guide who infringes on
another guides hunting area.
REPRESENTATIVE HERRON asked if the intent is to prevent what is
occurring in many drainages in western Alaska where the resource
is cleaned out and then the guides move to the next drainage,
without conscience.
CO-CHAIR FEIGE related his perception that since existing
statute doesn't have a catch-all for things that are not
specifically defined, by specifying "unprofessionalism, moral
turpitude, or gross immorality" the board is provided some
authority to address actions that aren't in the spirit of a
professional guide.
1:23:45 PM
REPRESENTATIVE MUNOZ asked if the assistant class-A guide has
the same requirements as a full guide.
MR. PASCHALL informed the committee that there are four
different levels of guides: an assistant guide, a class-A
assistant guide, a registered guide outfitter, and a master
registered guide outfitter. All of the levels of guides have
different requirements [that allow progression to higher levels
of guides]. For example, a registered guide outfitter is only
licensed in certain areas and has to be a class-A assistant
guide for a period of time. At each level there is a higher
level of experience. In further response to Representative
Munoz, Mr. Paschall clarified that the registered guide
outfitter is the only individual allowed to contract a hunt, and
the registered guide outfitter can utilize a class-A guide for
certain provisions of the hunt, such as running a camp or
physically taking the hunter to track the animal. Statute
specifies which type of guide can do what and HB 229 doesn't
really change that.
1:25:35 PM
REPRESENTATIVE MUNOZ inquired as to the difference in the
licensing requirement between a full guide and an assistant
guide.
MR. PASCHALL, referring to AS 08.54, informed the committee that
an assistant guide must be 18 years of age, legally hunted [big
game] in the state for two years, possess a first aid card
[issued by the] Red Cross [or similar organization], obtain a
written recommendation from a registered guide-outfitter who
intends to employ them as an assistant guide, or provide
evidence that they have passed an assistant guide training
course approved by the board. A class-A assistant guide must be
21 years of age, requires a fee, must have first aid training,
has been employed during at least three calendar years as any
class of licensed guide in the game management unit for which
the license is sought, at least 10 years hunting experience in
the state, evidence that the individual physically resides in
the game management unit in which the assistant is employed,
evidence that the individual has had at least 15 years hunting
experience in the game management unit in which the individual
is to be employed, and a written recommendation from a
registered guide-outfitter who intends to employ the individual
as a class-A assistant guide, or physically resides in the game
management unit, has 10 years of experience, and has passed a
class-A assistant guide training course approved by the board.
1:28:04 PM
REPRESENTATIVE MUNOZ, referring to page 2, line 24, surmised
then that a class-A assistant guide would be allowed to
supervise and conduct a hunt. She then asked if the
aforementioned is allowed now.
MR. PASCHALL stated that it's left a little up to interpretation
as to what is expanding or constricting. The current statute
requires that the contracting guide be present in the field with
the client one time during the hunt, but there is no
specification beyond that. Therefore, if the contracting guide
meets the client at the lodge, the requirement has been met.
Adding the language "supervising" and "conducting the hunt"
allows the board to define the rules under this new statute in
that a [registered guide-outfitter] who contracts for a guided
hunt has to be in the field supervising, participating, and
conducting the contracted hunt unless the hunt is conducted by a
class-A assistant guide.
1:30:15 PM
REPRESENTATIVE P. WILSON commented that Representative Herron's
statements regarding guides cleaning out drainage areas is very
important to the residents of those areas. She expressed hope
that there is some manner in which such immoral activity can be
addressed.
1:31:58 PM
JOE WANT, Registered Guide, related that the problem with the
existing situation is that even with the four different levels
of guiding licenses an assistant guide can be placed in a camp
to guide several hunters for sheep or brown bear. Such an
assistant guide is an individual who [at a minimum] has lived in
the state for two years, killed one animal, and hunted for 30
days per year. Mr. Want emphasized that there is no mandatory
supervision of these young individuals entering the industry.
Mr. Want interpreted the term "unless" [on page 2, line 25] to
mean that he, a registered guide [for units 6-26], could work as
a class-A assistant guide in Southeast Alaska and the guide
would no longer have to fulfill the supervising obligations
mentioned in the first part of the legislation. Although Mr.
Want has been involved in the guiding industry since 1968, he
said that he has no business running a hunt in unit 4. He
opined that HB 229 is going to exacerbate the problem rather
than solve it. He then said that it's laudable for the
legislation to specify that "the board may adopt regulations",
but he suggested that it should say "the board shall adopt
regulations". Mr. Want emphasized that creating a situation in
which an 18 year old, [as a class-A assistant guide] takes
clients on a hunt without any direct supervision is
inappropriate and a misrepresentation to the public.
1:38:04 PM
CO-CHAIR SEATON inquired as to the definition of
"unprofessionalism" that would be applied by the Big Game
Commercial Services Board to suspend a license. He asked if
there is some commonly accepted criteria within the guiding
profession that would be considered "unprofessionalism."
MR. WANT stated that one of the main problems in the industry is
the lack of a definition for unprofessionalism, which has led to
problems with supervising. One of the main issues in the
guiding industry, he opined, is placing individuals in the field
without the necessary training or supervision. The
aforementioned is exemplified in the licensing process in which
the test percentages of individuals who have [guided for] three
years continue to remain [the same as when they initially took
the test]. Mr. Want stated that Co-Chair Seaton had identified
the issue, the lack of a standardized or generally accepted
definition of professionalism or other practices.
REPRESENTATIVE HERRON remarked that defining professionalism
continues to be an issue for him because there are unethical
practices that impact the resources in Alaska.
1:40:19 PM
WADE WILLIS, Resident Hunter, said he has great concerns about
Version I. The proposed regulatory amendments in Version I
attempt to liberalize the restrictions on the number of guide
use areas in which a registered guide or class-A assistant guide
can legally operate. The aforementioned is significant,
particularly during a time when the Big Game Commercial Services
Board is saying the industry should downsize while requesting
the legislature liberalize the areas in which the guides can
work. As many know, the aforementioned is what the Department
of Natural Resources (DNR) guide concession proposal program is
all about. Mr. Willis pointed out that the amended language in
Sections 3 and 4 allows a registered guide to operate in more
than three guide use areas, which is the current regulatory
restriction. A [registered] guide can accomplish the
aforementioned by partnering with other registered guides that
have game unit areas in which the guide isn't legally allowed to
operate. By partnering with a registered guide, a [registered]
guide can guide in up to 12 game unit areas, depending upon how
many partners he has. Astonishingly, the [registered] guide who
partners with other registered guides outside his/her game unit
area is circumventing the standards the Big Game Commercial
Services Board has in those areas, which includes having
previous experience guiding in the location and knowledge of the
area. Essentially, this revokes the intent of the professional
licensing standards of the board and may provide the client with
a substandard guide, in comparison to the current regulatory
language that requires any guide to demonstrate a minimum
knowledge of the area. However, most alarming is the proposed
amendment in Section 4 that would allow the contracting
registered guide-outfitter to never step foot in the field,
never see the client, or even be in the state. Therefore, Mr.
Willis questioned how the aforementioned improves the industry
standards or benefits the client. This proposal, he stressed,
seems to be nothing more than an attempt to expand the guiding
industry at the expense of not only the highest quality
experience for the client as well as the wildlife resources of
Alaska. Mr. Willis requested that the committee consider the
underlying intent of HB 229, which he believes is to deceive
this committee for the benefit of a few contracting guides.
This legislation is neither effective nor efficient at improving
the industry, he opined. Mr. Willis further requested the
committee review the administrative code changes that have
occurred in the past year versus what is being proposed on the
Big Game Commercial Services website. He opined that the
committee is being asked to liberalize the statutes and [the
board] is extensively liberalizing the code. He related his
understanding that the board wants to allow an applicant to be
an assistant guide without ever having hunted in Alaska.
1:46:11 PM
THOR STACEY, Alaska Professional Hunters Association (APHA),
related support for the passage of CSHB 229, Version I. He
noted that many of the professional members of the APHA as well
as APHA itself participated in the drafting of this legislation
and the subcommittee process that created the Big Game
Commercial Services Board. With regard to the clarification of
the relationship of a registered guide working with another
registered guide, he reminded the committee that a registered
guide is a higher level of licensee than a class-A assistant
guide. He explained that the association requested that to
clarify the relationship that a registered guide be considered a
class-A assistant guide because the registered guide holds a
higher level of license and pays more fees and has to prove a
higher level of competency in any game management unit in the
state. The language "in any game management unit in the state"
had to be clarified because class-A assistant guides are
specific to units and individual experience in the unit, while a
registered guide license enjoys privileges all over the state to
test or qualify to contract services in any game management unit
after qualifying. There has to be a definition of the
relationship between two registered guides when one is employing
the other. Furthermore, the clarification restricts the
relationship by specifically removing the ability for a
registered guide employed by another registered guide to
subcontract or perform the specific functions of a registered
guide, that being contracting a hunt. Therefore, the license is
restricted by treating the registered guide who is employed by
another registered guide as a class-A assistant guide rather
than allowing him/her to remain a registered guide. Mr. Stacey
opined that the charge the proposal is expanding the privileges
is incorrect. With regard to the changes in the supervision
requirement in Section 4, Mr. Stacey related that APHA is in
support of meaningful supervision in the field. The APHA also
supports the progression of assistant guides to registered
guides and registered guides to master guides. Such progression
is based on an apprenticeship program that requires a lot of
supervision and personal recommendations. Mr. Stacey clarified
that APHA isn't in favor of reducing supervision requirements
rather it's in favor of meaningful supervision requirements.
The current requirement [that a registered guide-outfitter who
contracts for a guided hunt has to be physically present in the
field with the client at least once during the contracted hunt]
is easily circumvented by going outside of a borough or a town
and signing a contract in what's technically considered "the
field" and then the guide licensee being contracted by the
contracting guide can say they fulfilled the requirement. The
aforementioned isn't a meaningful supervision requirement and
because it's in statute the board can't address it by
regulation. Therefore, by removing that clause and inserting
the language "supervising" and "and conducting the hunt" on page
2, lines 24 and 25, the board is provided the ability to
approach meaningful supervision requirements through the
regulatory process of the Big Game Commercial Services Board.
The intent is not to relax supervision requirements but rather
allow the creation, discussion, and adaptation of meaningful
supervision requirements through regulation.
1:51:02 PM
CO-CHAIR FEIGE asked if "the field" is considered anywhere
outside of a municipal boundary.
MR. STACEY said that "the field" is a very problematic
definition as it's ambiguous and has been interpreted in various
different manners by the various different enforcing agencies.
The intent of the change [encompassed in Version I] was to
maintain supervision and have a meaningful definition of it that
will be adapted through the regulatory process with industry
input. The term "conducting" implies a high level of
supervision/participation of a hunt. The "unless" means that
the actual conducting can be performed through a licensed
professional, either a class-A assistant guide or a registered
guide working for another registered guide, or an assistant
guide. However, [the registered guide-outfitter] would still be
required to supervise and participate in the contracted hunt.
He said that "conducting" is only altered.
1:53:14 PM
MR. STACEY then turned to the language on page 2, line 31:
"unprofessionalism, moral turpitude, or gross immorality." In
discussions of the subcommittee and the Big Game Commercial
Services Board, there was the perception that the aforementioned
types of conduct were defined by a body of case law and weren't
ambiguous terms. As qualified and responsible professionals,
[APHA] supports having high quality individuals in the guide
industry and is excited to have such language in HB 229. In
conclusion, Mr. Stacey said he would appreciate the committee's
support and rapid movement of the legislation from committee.
1:54:48 PM
CO-CHAIR SEATON stated that on page 2, line 25, the term
"unless" definitely needs to be clarified because it reads that
everything prior to the comma is modified by the "unless."
Therefore, it's not clear that it would only apply to conducting
the hunt but rather would also apply to supervising and
participating in the hunt. Co-Chair Seaton said he is glad to
hear that APHA wants the provision to require supervision and
participation in the hunt by the registered guide-outfitter
while conducting the hunt can be performed through a contract
with a class-A assistant guide.
MR. STACEY agreed with Co-Chair Seaton. He specified that the
provision attempts to clarify whether a contracting registered
guide can go and get supplies in the middle of the season and
leave the hunt to be conducted by those in the field.
1:56:32 PM
MR. STACEY, in response to Representative Munoz, explained that
a class-A assistant guide is a license fee that has a high level
of experience in a specific game management unit or region of
the state. A class-A assistant guide is a type of registered
guide that can't contract a hunt, but is an expert in a local
game management unit or area and has the ability to supervise a
camp without a registered guide being physically present.
1:57:31 PM
REPRESENTATIVE MUNOZ, drawing from earlier testimony, asked if
this provision could result in the hunt being conducted by a
guide 18 years of age.
MR. STACEY said that a guide conducting an unsupervised hunt
would have to be at least 20 year old, which is the threshold
for a class-A assistant guide. An assistant guide could be 18
years of age.
CO-CHAIR FEIGE informed the committee that a class-A assistant
guide must be at least 21 years of age.
MR. STACEY remarked that the question is what level of licensed
professional will be allowed to supervise a camp. A registered
guide needs to have the trust in either a class-A assistant or
another registered guide to supervise a camp.
1:58:37 PM
REPRESENTATIVE P. WILSON surmised then that a class-A assistant
or another registered guide supervising a camp is a temporary
situation, such as when the registered guide-outfitter has to
get supplies.
MR. STACEY pointed out that a registered guide can have two or
three clients in the field at the same time as the contracting
hunter and have licensed professionals with them in camps.
Furthermore, the [registered guide] isn't required to be
physically present through the beginning and end of each
client's hunt; otherwise there would be no way to have three
clients during a 10-day season. The goal of the supervision is
to ensure that the registered guide, the experienced individual
who holds the land use permit and has the right to contract
hunts, has an adequate level of control and supervision over the
guides in the field while protecting the interests of his
clients. Therefore, the provision [in Version I on page 2,
lines 24-27] clarifies [the contracting registered guide-
outfitter's] ability to allow a class-A assistant guide or a
registered guide working for [the contracting registered guide-
outfitter] to supervise the camps, to the capacity their license
status specifies. The contracting registered guide-outfitter
still has to participate and supervise anyone who works for
him/her and any hunts that he/she is contracting. Having a
registered guide-outfitter in the field for every hunt and camp
isn't necessarily the intent of supervision.
2:01:00 PM
MR. STACEY, in further response to Representative P. Wilson,
said that most guides have one-on-one relationships with their
assistant or client. There are cases in which a client may want
to hunt with another client and the guide in the field would
then have two clients. In such cases, the aforementioned is
clearly laid out in the business arrangement between the
registered guide and the clients. The goal with supervision is
to ensure that the registered guide is supervising and
administering as the highest qualified professional and the one
that has the legal right to contract the hunt. The assistant
guides have to be allowed to hunt as part of the progression of
the responsibilities of the license.
2:02:26 PM
REPRESENTATIVE P. WILSON inquired as to the difference between a
registered guide outfitter and a class-A assistant guide.
MR. STACEY clarified that a registered guide outfitter has the
ability to contract a hunt and enter into a business agreement
with a client. The only privilege a class-A assistant guide
enjoys that an assistant guide doesn't is the ability to
supervise a camp unattended in a game management unit for which
they are licensed. He characterized a class-A assistant guide
as a regional expert. The registered guide and master guide
license holders are the only two license statuses with the
ability to contract and represent big game hunting in Alaska.
2:03:31 PM
REPRESENTATIVE HERRON related his understanding that the
language "the field" as related to a business relationship means
that it's a defined area or the area of business.
MR. STACEY posed a scenario in which a guide conducts hunts on
state lands outside of Port Heiden, which is within the guide
use area in which the guide conducts business. Port Heiden is
considered an area of habitation because it has infrastructure,
and thus it's not considered "the field." However, when one
walks down to the river on state land, [it is considered the
field]. He noted that the following existing statutory
language: "physically present in the field with the client at
least once during the contracted hunt" doesn't fulfill the
intent of supervision. By approaching this definition in
regulation, he opined that there's a better chance to get a
handle on it. In further response to Representative Herron, Mr.
Stacey indicated that debating the definition of "the field" in
regulations would be preferable to in statute.
2:05:20 PM
CO-CHAIR SEATON posed a scenario in which three guides partner
and provide services in nine areas rather than three. He asked
if the aforementioned is a realistic possibility and something
APHA supports.
MR. STACEY specified that APHA supports the three area
restriction that is three guide use areas per registered guide
licensee. The abuse or utilization of that is outside the
sphere of two registered guides deciding to work together; it's
slightly outside of the sphere of this legislation. He pointed
out that the removal of the language on page 2, lines 16-19,
would further restrict the ability to subcontract. A registered
guide license has the specific power to sign or contract hunts.
Therefore, by removing the aforementioned language and treating
that registered guide as a class-A assistant guide would help
clarify that another registered guide can't sign a contract for
the registered guide by whom he is employed. He said that he
would read the language [in Section 3] such that a registered
guide-outfitter who is employed by another registered guide-
outfitter couldn't contract for the employing registered guide-
outfitter.
2:08:33 PM
PAUL JOHNSON, Chair, Big Game Commercial Services Board,
explained to the committee that originally many of the issues
were addressed in regulation, but when the board sunset the
overriding issues were placed in statute. He informed the
committee that the [board] has a lot of regulations that define
supervision and participation. With regard to Mr. Want's
request to change the language on [page 1, line 8] from "may" to
"shall" so that the board has to address these issues, Mr.
Johnson said it's a reasonable request. Trying to sort out
these matters in statute is impossible, but doing so through
regulation would allow one to address the changes over time.
[Under existing statute], subcontracting is occurring. Mr.
Johnson emphasized the difficulty the board has had over the
years as it has tried to define "in the field". He related his
understanding that [the language in Version I] requests more of
a registered guide-outfitter who contracts for a guided hunt
than being physically present in the field with the client at
least once. Being able to define supervision, participation,
and what conducting a hunt means would then allow the board to
define "conducting". Mr. Johnson said he understood Mr. Want's
concern regarding the inclusion of the term "unless" on page 2,
line 25. However, it was made clear [by the Department of Law
(DOL)] that it would allow the board to define those. With
regard to the inclusion of the language "unprofessionalism,
moral turpitude, or gross immorality", he opined that most of
the boards have such language. He then pointed out that the
guiding industry, a $300 million industry, has never asked the
state for any funds. Although he acknowledged there are
problems, he said was proud of the guiding industry. The
standards of the guiding industry have been increased, but those
standards that have been placed in statute don't allow the board
to deal with them as things arise. Mr. Johnson stated that he
would like to see the board deal with these issues and give the
flexibility to sort them out over time.
2:12:46 PM
MR. JOHNSON returned to the inclusion of the language
"unprofessionalism, moral turpitude, or gross immorality" and
related that the state is forced to give applicants without a
fine of up to $2,500 a [guiding] license. Once an individual is
given a license, it's a property right given to them by the
state and the cost to [revoke or suspend] it is huge. In fact,
the cost of the hearing is $30,000. These costs are borne by
the guides through their licensing fees. The industry
desperately needs that provision. The industry also needs to be
able to address some of the lighter offenses so that the courts
don't have to suspend a license for those type of violations.
He then said he is always disappointed when he hears that a
guide is unethical to the point of hunting a local drainage [to
the point of no resource]. With regard to earlier mentioned
concerns, he clarified that the board wants the contracting
guide to participate [in the hunt] and be able to fly out and
meet [supplies or other clients] as they are brought to the
field. In conclusion, Mr. Johnson expressed hope that the
legislation will be moved forward as there are some very
important provisions in this legislation.
2:16:13 PM
CO-CHAIR FEIGE related his understanding that this legislation
was developed from the Big Game Commercial Services Guide
Board's recommendations for changes to the statute.
MR. JOHNSON confirmed that, and highlighted that there has been
controversy in the guiding industry for a long time and the
board would like legislation to clean up the guiding industry
statutes over time. The board has been told that the language
in Version I would allow them to define the terms "supervision",
"participation", and "conducting" even with the inclusion of the
term "unless".
2:17:45 PM
CO-CHAIR FEIGE surmised then that Mr. Johnson believes passage
of Version I would provide the board the authority to make
judgment calls and specify more clearly in regulation exactly
the standard to which hunters and guides would be held.
MR. JOHNSON said that is correct. He then noted that the class-
A assistant guide license was designed to ensure that rural
residents have [guiding] work. He further noted that every
landholder, including the federal government, the state
government, and the private holders, have their own [guiding]
provisions. He mentioned that the state, through the Department
of Natural Resources (DNR) process, has been working on [the
process].
2:19:32 PM
REPRESENTATIVE P. WILSON asked whether there are definitions of
"supervising", "participating", and "conducting" or do those
terms need to be defined.
MR. JOHNSON clarified that "supervising" and "participating" are
defined and now [Version I] would provide the ability to define
"conducting". "So, that word 'conducting' ... for both sides of
... the word 'unless' would allow us to define 'conducting' that
they wouldn't, for instance, be able to conduct a hunt unless
this level of supervision happens," he explained.
2:20:15 PM
CO-CHAIR SEATON related that although he is supportive of the
legislation, he wanted to ensure that the board isn't saddled
with statute that says the board can't do what it wants because
the term "unless" was in the wrong place. Co-Chair Seaton
thanked Mr. Johnson for the testimony regarding the intent of
the legislation, which should be helpful.
MR. JOHNSON agreed that the intent discussion would be helpful.
2:21:31 PM
CO-CHAIR FEIGE announced that HB 229 would be held over.
HB 280-OIL & GAS TAX CREDITS: KOTEZBUE/SELAWIK
2:21:42 PM
CO-CHAIR FEIGE announced that the next order of business would
be HOUSE BILL NO. 280, "An Act providing for a credit against
the oil and gas production tax for costs incurred in drilling
certain oil and gas exploration wells in the Kotzebue Basin or
the Selawik Basin; and providing for an effective date."
2:22:13 PM
BRODIE ANDERSON, Staff, Representative Reggie Joule, Alaska
State Legislature, speaking on behalf of the prime sponsor,
Representative Joule, explained that HB 280 proposes an oil and
gas exploration tax credit for the underexplored area of the
Kotzebue/Selawik Basin. The legislation incentivizes
exploration drilling as past indicators have shown that
exploration and development in the Kotzebue Basin is possible.
However, due to its remote location exploration, economic
growth, and development has been difficult. Furthermore, the
lack of reliable energy supplies and high energy prices has made
exploration and development in the area even more difficult.
Therefore, this legislation will strongly encourage companies to
invest in this frontier basin such that rural Alaska can be
provided with lower cost energy and provide opportunities for
exploration and in-state use. Mr. Anderson then reviewed the
sections of HB 280. He explained that Section 1 adds the
Kotzebue Basin to the actual production tax credit. Sections 2
and 3 remove the definition of the Cook Inlet from the previous
section and Section 3 creates a new set of definitions in its
own subsection. Section 4 is the actual language establishing
the Kotzebue Basin tax credit. Section 5 specifies an effective
date.
2:24:19 PM
MR. ANDERSON, referring to Section 4, pointed out that the tax
credit would be applicable for anyone drilling the first three
holes down to 2,000 feet for the purpose of exploration of oil
and gas. The first [exploration well] is entitled to a 100
percent tax credit of its exploration well expenditures or $30
million, whichever is less. The second [exploration well] is
entitled to a credit in the amount of 90 percent of the
exploration well expenditures or $27 million, whichever is less.
The credit for the third [exploration well] would be in the
amount of 80 percent of the exploration well expenditures or $24
million, whichever is less. If these exploration wells move to
production, 50 percent of the tax credit is required to be paid
back.
2:25:22 PM
REPRESENTATIVE KAWASAKI observed that HB 280 is similar to
legislation for the Nenana Basin. He inquired as to why the
drilling depths are very different between HB 280 and HB 276.
MR. ANDERSON informed the committee that the state needs to look
at frontier basin exploration as the next step to provide for
the state's economy. When looking at the Kotzebue Basin there
were indications that there could be shallow gas reserves that
might be producible. Therefore, the legislation was drafted
with the shallower ceiling in order to capture some potential
reserves that wouldn't otherwise qualify because the cost to get
the rig to the Kotzebue Basin will remain the same regardless of
the depth of the well.
2:27:18 PM
REPRESENTATIVE MUNOZ inquired as to why the credit proposed in
HB 280 is so much greater than the credit in the Nenana Basin
legislation, HB 276.
MR. ANDERSON explained that the credit in HB 280 was modeled
after the Cook Inlet jack-up rig credit and then considered the
cost of transportation, the remoteness of the site, and other
factors. Therefore, the cost of transporting materials to the
site was added to the [base] credit.
2:28:12 PM
CO-CHAIR SEATON, referring to the jack-up rig, asked if this
legislation refers to onshore or offshore.
MR. ANDERSON said that it's the expectation that this would at
least begin onshore. In further response to Co-Chair Seaton,
Mr. Anderson related his understanding that the language used
was for the purpose of oil and gas, but he wasn't sure about the
definition of wells. He offered to speak with the drafters to
ensure that the clarifying language would only include wells and
rigs that would classify for oil and gas.
2:30:04 PM
REPRESENTATIVE P. WILSON pointed out that the language in
Section 2 on page 2, lines 18-19, specifies that "a person
drilling an exploration well is not entitled to a credit for
more than one exploration well under this subsection." However,
the language in Section 4 on page 4, lines 6-8, specifies that
"A person or an affiliate of a person may qualify for a drilling
credit for more than one exploration well under this
subsection."
MR. ANDERSON related his understanding that the language in
Section 2 was referring to the Cook Inlet directly, while the
language in Section 4 is the new language for the Kotzebue
Basin. He offered to review whether there is a conflict and get
back to the committee.
2:32:23 PM
LANCE KILVAGUIQ MILLER, PhD, Vice President - Resources, NANA
Regional Corporation, Inc., began by clarifying that the
Kotzebue/Selawik Basin is essentially the same area. He then
expressed excitement for this proposal in terms of the potential
for energy independence for rural Alaska as well as the state.
The map on the slide entitled "Kotzebue Basin Location"
illustrates that the basin goes offshore and is part of the
Chukchi Hope Basin system. However, the onshore potential is
what's being considered. The basin is a fairly significant size
that is about 20,000 feet thick with some Tertiary and
Cretaceous sediments, which refers to the geologic age of the
strata. He then moved on to the slide entitled "Basin
Comparison" that provides an aerial view of the Kotzebue Basin
in comparison to the Cook Inlet Basin. Although the two basins
are similar in size, it doesn't mean the Kotzebue Basin will
reach the same production as the Cook Inlet Basin. For
perspective, Mr. Miller informed the committee that 40 years ago
2 wells were drilled by Chevron in the Kotzebue Basin as opposed
to the numerous wells that have been drilled in the Cook Inlet
Basin. He then directed attention to the slide entitled "Local
Geography" that presents a map specifying the location of the
two wells drilled in the Kotzebue Basin. This map illustrates
the size of the Kotzebue Basin, which is 140 miles by 75 miles.
This map also specifies the prospects that have been defined
based on the geology of the region.
2:34:49 PM
MR. MILLER then moved on to the slide entitled "Exploration
History and Data." He stressed that the Kotzebue Basin is an
exploration play for which there has been some work. In 1972
Chevron approached NANA Regional Corporation and some seismic
work led to the aforementioned two wells being drilled. In the
course of that time, the companies wanted to look at the base,
the rocks, and the basin [which resulted in the drilling of]
stratigraphic holes rather than looking at the best potential
geologic targets. The next slide, entitled "Primary Reservoir
Targets" is a [60-mile] cross section between the two wells
[drilled by Chevron in 1974]. The Nimuiuk Point well was
drilled to 6,315 feet while the Cape Espenberg well was drilled
to 8,360 feet. The geology of the area matched well as there
were good source rocks and host rocks for hydrocarbon plays
across the 60 miles of basin [between the two wells]. Although
it's a geologist's best guess, it's definitely dated efficient.
The slide entitled "Basin Overview" highlights the two basins
and the good sources for hydrocarbon potential. The green lines
are the faults, which when combined with the folding of the
rocks combine to what are hopefully good traps for drilling.
2:37:03 PM
MR. MILLER pointed out that the slide entitled "2 of the 30
Prospects" highlights two of the potential targets, Cape
Espenberg Prospect and Amaouk Creek Prospect, in relation to the
wells drilled by Chevron in 1974. NANA Regional Corporation had
an agreement, which has now lapsed, with California Independent
to evaluate and drill some holes. Although the deal was signed
in 2008 when gas prices began to decrease, the result was a lot
of reinterpretation of the work. The tan areas of the
aforementioned slide are the areas NANA Regional Corporation
would like to drill. He then directed attention to the slide
entitled "Amaouk Creek Prospect," which is just a seismic line
in the Amaouk Creek prospect. To a geophysicist, this
represents about a 10,000 foot cross section of the earth. The
interpretation of the folds and closures is that the rock units
are folded and some of the domes capped by reservoir seals could
be good potential for hydrocarbons. The little map inset in the
upper right is an illustration of a dome closure of the Amaouk
Creek prospect; the blue line running through it is the cross
section presented on the slide. Although this is old data from
the 1970s, it has been reinterpreted. Referring to the slide
entitled "Amaouk Creek Prospect", he pointed out that the data
relates that there is coal, shale, and sand. The next component
would be to find the proper structure, either folds or faults as
illustrated on the prior slide. Therefore, Mr. Miller said that
the Amaouk Creek Prospect is a fairly large sized dome with a 27
square mile closure that has potential for hydrocarbon
accumulation. Again, Mr. Miller said he's not trying to say
there will be 2 trillion cubic feet (tcf) of gas in this
closure, but he directed attention to the slide entitled "Amaouk
Creek Prospect: Comparison to Partial Analogues" that relates
what the Kenai and Beluga River Gas Fields in the Cook Inlet has
produced. The comparison illustrates that the Amaouk Creek
Prospect has some fairly significant large structures showing
per the geology and geophysics in the region.
2:40:27 PM
MR. MILLER, referring to the slide entitled "Key Points",
reiterated that over 40 years ago two wells were drilled into
this deep basin, which is similar in size to Cook Inlet and San
Joaquin-Sacramento Basins. There are many indications of a
significant hydrocarbon system. Although it remains to be seen
whether the hydrocarbons are gas prone or oil prone, it's likely
to be more of a gas play. As was discussed, it has been
difficult to attract financing. In the past, the majors
performed the [exploration] work for oil, but now the hand full
of majors leave the high risk work to the independents. Mr.
Miller stressed that [Amaouk Creek prospect] is an exploration,
wildcat play. Certainly, there are local needs in the region
and Red Dog is a potential user. Although he hesitated to say
it, Mr. Miller said that ideally the prospect could be large
enough to export, which is specifically why he didn't include
anything about commercialization as there is the need to be
careful about expectations.
2:43:37 PM
CO-CHAIR SEATON recalled that part of the reason for the
incentive in the Cook Inlet was that people had tapped into the
upper levels and never gone to the lower areas. This proposal
seems to only go to 2,000 feet and doesn't even reach the cap.
With the Cook Inlet proposal the intent was to develop in order
to gain information all the way to the tertiary level.
Therefore, he inquired as to why the proposal for [Amaouk Creek]
would be to drill relatively shallow wells and not assess. With
the Nenana Basin, the [goal] has been to obtain information that
would be applicable and beneficial to the state.
MR. MILLER clarified that NANA Regional Corporation isn't tied
to the 2,000 feet. Of interest, Mr. Miller related that in the
1950s a water well was drilled near Kotzebue and it blew out mud
and water for about 12 hours. Additionally, there are some
targets located at levels less than 2,000 feet. Therefore,
there is the potential for shallow gas. However, the reality is
the desire to drill deeper. He noted that the maximum basement
is likely about 10,000 feet and that is likely the intent. He
further mentioned that the matter must also be vetted by DNR,
which would thwart merely drilling a water well. In further
response to Co-Chair Seaton, he stated that NANA Regional
Corporation would be fine using the Nenana language.
2:46:56 PM
CO-CHAIR SEATON stated that the [committee] is trying to develop
geologic information and resource assessment because producing
the first thing that is hit doesn't give the state the
information regarding the full potential of the basin.
2:47:41 PM
CO-CHAIR FEIGE related his assumption that NANA Regional
Corporation wants to service Kotzebue and the local market with
a heating source. He asked if it would make sense to balance
the risk and reward and drill a shallower well that is perhaps
more likely to payout. He then asked if NANA Regional
Corporation's main objective to find development suitable for
export or for serving the local [energy] need.
MR. MILLER answered that it's really both. Certainly, there is
incredible support for onshore drilling.
2:48:44 PM
ELIZABETH SAAGULIK HENSLEY, JD, Corporate & Public Policy
Liaison, NANA Regional Corporation, interjected that it is one
of the top four priorities of the Northwest Arctic leadership
team, which consists of NANA Regional Corporation, the Northwest
Arctic Borough, the Northwest Arctic Borough School District,
and Maniiliq Association.
2:49:08 PM
CO-CHAIR FEIGE inquired as to how much of Kotzebue Sound is
state waters versus federal waters.
MR. MILLER, referring to the earlier question, the goal is both
to export oil and to provide it for local use. As the case with
most resource projects in Alaska, it needs to be significant in
order to make it economic and thus a goal of the project would
be for it to be exportable. Mr. Miller couldn't specifically
provide the amount of land in the Kotzebue Basin that's state
land, but he did characterize it as a significant amount of
state land in the water. He offered to obtain that information
for the committee.
2:50:36 PM
REPRESENTATIVE GARDNER asked whether NANA Regional Corporation
has spoken with any explorers regarding interest in this
approach. Since this area is only a few miles from the coast,
she asked if the water is deep enough to use tankers.
MR. MILLER informed the committee that NANA Regional Corporation
has been fairly active in terms of explorers. In fact, even in
the 1990s, NANA Regional Corporation engaged geologists who used
to work with Chevron and the majors. More recently, NANA
Regional Corporation has spoken with a fair number of
independents. He related that there is interest and noted that
people were unaware of the existing credits, and thus as the
word spreads more will be attracted. Still, the location is
remote and a drill would be tied up for a year. With regard to
the tanker question, Mr. Miller said that right outside of
Kotzebue a tanker would have to be litered.
MS. HENSLEY confirmed that a tanker would have to liter.
Although a tanker can get near Kotzebue, items would have to be
barged. She noted that there is also a port at Red Dog. She
then reminded the committee that the Northern Waters Task Force
did recommend that the state consider more options in the Arctic
north of Nome. There has been discussion and in fact, the port
bond includes funds for a port at Kotzebue.
2:53:16 PM
REPRESENTATIVE GARDNER related her understanding that without a
coastal zone management program, the state can't construct a
deep water port in the Arctic. She asked if that's true for
Kotzebue as well.
MS. HENSLEY said she is not sure about that, although she
recalled hearing the same question. She opined that more
research has to be performed on that matter, and thus she
offered to provide the committee more information on that after
more analysis is done.
2:53:53 PM
REPRESENTATIVE KAWASAKI, recalling Mr. Miller's comments
regarding the difficulties of exploration in this location and
Alaska, questioned how one can be sure gas will be produced even
if it's found and the state subsidizes 100 percent of it.
2:54:53 PM
MR. MILLER said that if [the play] is large enough, liquefied
natural gas (LNG) has been looked at conceptually which would be
for Asian markets. Although the discussion is in terms of gas,
the hope is that there will also be oil, which would change the
game. What the true hydrocarbon system is, is still being
evaluated, he highlighted. He agreed that commercialization
needs to be significant to get it to markets, which is part of
exploration.
MS. HENSLEY added that the Red Dog Mine is actively exporting.
In fact, Red Dog is one-quarter of the $4 billion in the
[state's exports]. She emphasized, "So, if we do have the
amount, then ... we can find a way ...; we've done it with Red
Dog."
2:56:26 PM
CO-CHAIR FEIGE cautioned that this is still speculation and
depends upon how much information is available. The more
information there is the more the risk is reduced for investors.
He said that NANA Regional Corporation already seems to have a
fair amount of seismic data that defines a lot of the area. He
asked if more seismic information or seismic information with
newer technology is needed.
MR. MILLER clarified that he isn't a petroleum geologist, but
those he knows have provided mixed reviews. Some have said it's
drill ready while others say that it would be nice to perform
more 3-D [seismic]. He opined that he would leave it up to the
person putting up the money.
2:58:10 PM
CO-CHAIR FEIGE asked if it's important for the company to have a
stake in the game to keep them honest and tighten up their own
decision making.
MR. MILLER replied yes, it's always good to have some skin in
the game.
2:59:03 PM
REPRESENTATIVE KAWASAKI pointed out that one of the differences
between the Nenana legislation and HB 280 is that HB 280 has an
immediate effective date. He asked if that immediate effective
date is in anticipation of folks drilling in the next season.
MR. MILLER related that the thought was that as this moves ahead
if folks get interested this year, they probably wouldn't drill
until the next year. He opined that it's already too late to
drill in 2012-2013. The idea is that if it all worked out, a
rig would be tied up and that would amount to $5-$6 million.
Therefore, costs could be incurred well before drilling
commenced.
[HB 280 was held over.]
3:01:17 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:01 p.m.