HOUSE SPECIAL COMMITTEE ON WORLD TRADE AND STATE/FEDERAL RELATIONS April 29, 1996 5:15 p.m. MEMBERS PRESENT Representative Ramona Barnes, Chairman Representative Gail Phillips, Vice Chairman Representative Bill Williams Representative Gary Davis Representative Gene Kubina Representative Eldon Mulder Representative Jerry Mackie OTHER HOUSE MEMBERS PRESENT Representative Kay Brown Representative John Davies Representative Joe Green MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 548 "An Act authorizing, approving, and ratifying the amendment of Northstar Unit oil and gas leases between the State of Alaska and BP Exploration (Alaska) Inc.; and providing for an effective date." - PASSED CSHB 548(WTR) OUT OF COMMITTEE PREVIOUS ACTION BILL: HB 548 SHORT TITLE: NORTH STAR OIL & GAS LEASE AMENDMENT SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 03/28/96 3434 (H) READ THE FIRST TIME - REFERRAL(S) 03/28/96 3434 (H) RESOURCES, FINANCE 03/28/96 3434 (H) FISCAL NOTE (DNR) 03/28/96 3435 (H) GOVERNOR'S TRANSMITTAL LETTER 03/28/96 3436 (H) ATTACHMENT/S&H SUPPLEMENT #21 04/03/96 (H) RES AT 8:00 AM CAPITOL 124 04/03/96 (H) MINUTE(RES) 04/10/96 (H) RES AT 8:00 AM CAPITOL 124 04/10/96 (H) MINUTE(RES) 04/12/96 (H) RES AT 8:00 AM CAPITOL 124 04/12/96 (H) MINUTE(RES) 04/15/96 (H) RES AT 5:00 PM CAPITOL 124 04/15/96 (H) MINUTE(RES) 04/23/96 (H) RES AT 3:00 PM CAPITOL 124 04/23/96 (H) MINUTE(RES) 04/24/96 (H) MINUTE(RES) 04/24/96 (H) MINUTE(RES) 04/24/96 4019 (H) WTR REFERRAL ADDED 04/26/96 (H) MINUTE(RES) 04/26/96 4040 (H) RES RPT CS(RES) NT 3NR 3AM 04/26/96 4041 (H) NR: BARNES, OGAN, GREEN 04/26/96 4041 (H) AM: KOTT, WILLIAMS, DAVIES 04/26/96 4041 (H) FISCAL NOTE (DNR) 3/28/96 04/29/96 (H) WTR AT 5:00 PM CAPITOL 124 WITNESS REGISTER JIM BALDWIN, Assistant Attorney General Civil Division Department of Law P.O. Box 110300 Juneau, Alaska 99811-0200 Telephone: (907) 465-3600 POSITION STATEMENT: Answered questions on HB 548. JOHN SHIVELY, Commissioner Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 Telephone: (907) 465-2400 POSITION STATEMENT: Answered questions on HB 548. ERIC LUTTRELL, Vice President Exploration and New Developments BP Exploration (Alaska), Incorporated P.O. Box 196612 Anchorage, Alaska 99519-6612 Telephone: (907) 564-5460 POSITION STATEMENT: Answered questions on HB 548. ACTION NARRATIVE TAPE 96-2, SIDE A Number 001 CHAIRMAN RAMONA BARNES called the House Special Committee on World Trade and State/Federal Relations to order at 5:15 p.m. Members present at the call to order were Representatives Williams, Davis, Kubina and Barnes. HB 548 - NORTH STAR OIL & GAS LEASE AMENDMENT Number 060 The first order of business was HB 548, "An Act authorizing, approving, and ratifying the amendment of Northstar Unit oil and gas leases between the State of Alaska and BP Exploration (Alaska) Inc.; and providing for an effective date." CHAIRMAN BARNES asked Mr. Jim Baldwin to come before the committee and state his name and position in state government. JIM BALDWIN, Assistant Attorney General, Civil Division Department of Law, stated his position in state government. CHAIRMAN BARNES asked Mr. Baldwin if he is the person who wrote the original legislation. MR. BALDWIN informed the committee he is not the attorney that wrote the original legislation, but he did review it and approved it before it was sent to the Office of the Governor. CHAIRMAN BARNES asked Mr. Baldwin if he is substantially familiar with it. MR. BALDWIN state he was. Number 129 CHAIRMAN BARNES asked Mr. Baldwin if he is the person who wrote the opinion under his signature. MR. BALDWIN indicated he did. He noted he consulted with people in the Department of Law and in the Department of Natural Resources (DNR). He stated he signed the opinion. CHAIRMAN BARNES asked Mr. Baldwin if he is substantially familiar with what is in the opinion. MR. BALDWIN said that he thinks he is. CHAIRMAN BARNES asked Mr. Baldwin to go through the opinion he wrote. Number 205 MR. BALDWIN explained the primary issue they dealt with in the opinion was what was the commissioner's authority to amend a net profit share lease as provided by existing law. He said they considered that issue and determined or advised the commissioner that they felt that the law was not clear on this point and that it needed clarification as far as the authority to amend the net profit share lease and that it was not provided by any existing provision in Section 38.05.180. He said that there had been some suggestion that there was some authority in Section 180(p). So the first part of the opinion deals with the fact that they believe that there needs to be specific authority provided to the Department of Natural Resources to make such a change in an existing lease. Mr. Baldwin indicated if the Chair wishes for him to go into detail about that analysis, he would. CHAIRMAN BARNES said she believes there are only two members of the committee that have participated in any prior hearings on the bill. She said she would appreciate it if Mr. Baldwin would briefly set out that discussion. Number 313 MR. BALDWIN said it was suggested that there was authority provided in subsection (p) of 180, which is basically the general leasing authority in the Alaska Land Act for oil and gas leases. Subsection (p) is specific authority to make certain changes, when necessary, to implement a unit. He said because of the wording of the statute, it talked about "may change royalty requirements," his office determined that the language was not broad or specific enough to cover a net profit share amendment because of the reference to royalty requirements and the fact that there is some authority out there that a net profit share provision is not the as a royalty. Therefore, any authority or authorization found in Section 180 (p) or (j), which is the provision that was enacted last year for royalty reduction, that any authority in existing law applicable to royalties was not necessarily applicable to net profit share reductions. He said they felt that there needed to be some specific change in the law enacted to authorize the commissioner of DNR to do what he was proposing to do. CHAIRMAN BARNES asked that the record reflect that all committee members were present. MR. BALDWIN explained their conclusion was that there needed to be some express authorization provided. He noted that is what one of the section in the original version of the bill that the Governor introduced would do. Mr. Baldwin explained since this lease was initially competitively bid, there was a question as to whether a change could be made to the lease at all which took place sometime after the lease was competitively bid, particularly since the net profit share provision was the main variable that was considered in awarding the lease in the first place. He said they considered that issue and relied heavily on the Kenai lumber case which set out the rules for when you can make changes to competitively bid procurements or solicitations. In their determination of the facts of this case, it appeared to them that a court would most likely not consider this change to be material. Principally, they relied upon the passage of time since the award of these leases, and basically the fact that the initial contracts, incorporated by reference of state law, seems to contemplate that the lease agreements are subject to change during the term as provided in law. Therefore, a change of this nature would not be considered to be material. He said they felt that the Kenai lumber case did not present a bar towards changing a net profit share lease provision. Mr. Baldwin said they also considered the issue of local or special legislation because as it came to them, the department was very concerned that there not be a broad ranging grant of authority given here, that it be very specific. The department wants to be able to consider these kinds of changes on a case-by-case basis because they are of such significant fiscal effect for the state treasury. They did not favor a law of general application, they wanted something that was very special and limited in its application. Mr. Baldwin said his office considered the issue of whether to propose a statute in that narrow form would violate the local or special prohibition in the Alaska Constitution and concluded that because this was such a significant revenue source and that under the terms of the lease amendments, there would be some other indirect benefits. This was a matter of statewide concern and it could, therefore, not be classified as local or special legislation and they felt that any court that reviewed a challenge on that basis would give a large degree of deference to the legislature in its determination that it wished to make a narrow statute. MR. BALDWIN referred to the response from a letter he received from the Speaker at the time that they were considering introducing this bill and said the question was raised by the Speaker as to whether or not this proposal would constitute an expenditure of funds that would be in violation of the public purpose doctrine. He said they considered that issue in the opinion and concluded that there was basically a trade off, a quid pro quo between the state giving up something, but also getting something in return and that in any case the legislature will grant a broad degree of deference to the legislature when it makes a determination concerning the resources or assets of the state and felt that this would pass a muster under the public purpose doctrine of the Alaska Constitution. Number 764 CHAIRMAN BARNES asked Mr. Baldwin to turn his attention to the original bill that was introduced and said based upon his testimony to the committee at this time, she believes that he has stated that the provisions of the bill would have to show a compelling state interest to change the provisions of the lease and that it must clearly show a general public purpose. Bearing that in mind, she referred to page 2, line 9. MR. BALDWIN asked if that is finding number (8). CHAIRMAN BARNES said it is findings (8), (9) and (10). She indicated those findings have words in them that she believes both Mr. Baldwin and herself recognizes as being non-binding non-legal terms under the laws in the state of Alaska. Chairman Barnes asked Mr. Baldwin if he would say that is true. She read the wording. "(8) BP Exploration (Alaska) Inc. has committed to hire Alaska residents and contractors and to fabricate modules for the unit in Alaska;" She asked Mr. Baldwin to keep in mind benefits that we are to derive from this compelling public purpose of changing these leases and asked him if he would say that "has committed to hire" means anything in Alaska law. Number 910 MR. BALDWIN said he is aware that the lease provisions that backup this bill are not stated in a mandatory way. In other words, they are very carefully worded so that there is no apparent state action to force the leaseholder to implement local hire. CHAIRMAN BARNES indicated that doesn't answer her question. She asked to Mr. Baldwin to look at sections (8), (9) and (10) together. She said, "Since we have to, under our constitution, derive from this legislation a compelling public purpose of commitment to the state that is concrete, would you believe either one of those three lines, as an attorney for the state, has any way nailed down anything concrete as it relates to hiring Alaskans or to building modules in Alaska?" MR. BALDWIN said he doesn't think those findings do that. He said, "But I think that there is, and as I testified in the Senate committee and I'll just state that here again that I think as a state, and we're acting with the powers of the sovereign state, we have to be extremely careful that we not do something that would be perceived as state action to implement a discriminatory provision that -- in other words, discriminates against nonresident workers." Number 1041 CHAIRMAN BARNES said with that in mind, she asked Mr. Baldwin to go back to what he just told the committee in that we have to show a public purpose clearly defined for changing these leases. She asked him if he can show her, since those lines don't do it, where in the bill there is a clearly defined public purposes for changing the leases. MR. BALDWIN said he believes that there has been testimony in other committees that there is a high degree of expectation that there will be a more expedited development of the field and that there may be a more certain expectation of revenue to the state treasury than we would have otherwise. He said he thinks there has been testimony and a record created to that effect. CHAIRMAN BARNES said there is nothing in the bill that says that. MR. BALDWIN explained there is nothing in the bill that says that, but they have been attempting to make that record as they have appeared before the various committees. Number 1113 CHAIRMAN BARNES said, "As long as BP, as the company negotiating with the state, voluntarily without coercion from us, concludes that it is in their interest to hire Alaskans and to build these modules in Alaska in exchange for us giving up the net profit sharing leases -- that would be constitutional wouldn't it? Voluntary. MR. BALDWIN answered in the affirmative and said he thinks that's right. He said, "I know that the Administration has approached this committee -- has approached the legislature with this problem as one of saying to you that we've negotiated this agreement in good faith and that it should be an up or down decision by the legislature. I know that has wrangled some because they want it to do more and the problem is what you can do is very limited as a state - what you can do is very limited, and if I were to sit here and tick off what you could do you probably wouldn't think that that's enough." CHAIRMAN BARNES said you'll agree that any piece of legislation that is put before a legislative body is subject to amendments. MR. BALDWIN said he would agree to that. CHAIRMAN BARNES said, "As long as we don't violate the terms of the lease, then you would say that we have the right to amend it. Would you not?" MR. BALDWIN responded, "I would say that you can amend the bill. I've been concerned with the fact that some of the committee substitutes that I've seen coming out of the preceding committee and out of the Senate where actual lease provisions were put in the bill, I think that presents a legal issue. That's kind of between the executive and the legislature. To a certain extent we've almost invited that by bringing it here but it's still...." CHAIRMAN BARNES said he didn't have a choice. MR. BALDWIN said they didn't have a choice. He explained what they are looking for is for the legislature to change the Enabling Act so that we can do this. He said that is something that clearly the legislature can do or not do. Mr. Baldwin noted it gets into a very difficult area when the legislature attempts to renegotiate the contract. CHAIRMAN BARNES indicated that is the question. As long as the legislature doesn't renegotiate the contract, there shouldn't be a problem. MR. BALDWIN said, "No." The legislature can condition enabling statute and that is purely within the legislature's lawmaking power. He noted he has been concerned when he sees rewrites of the amendments in the law. If the legislature wants to do that, there are other ways to do it. He said he isn't encouraging the legislature to do that. Number 1280 CHAIRMAN BARNES indicated she hasn't seen any of those. She noted she has a proposed committee substitute (CS) she will give to the committee. Number 1288 REPRESENTATIVE JERRY MACKIE referred to the committee substitute which came out of the Senate Resources Committee and asked Mr. Baldwin if his opinion is that it is unconstitutional because of local hire provisions. MR. BALDWIN said he believes it is a very questionable validity because the drafter attempted to make the bill appear that the leaseholder was expected to operate within the extent permitted by law, but there is also mandatory language as to local hire which confuses the issue a great deal. He said he thinks it gives cause for those who want to attack whatever hiring scheme is voluntarily implemented by the leaseholder to attack it and perhaps successfully so. It is great cause for concern. Number 1340 REPRESENTATIVE MACKIE asked Mr. Baldwin if it is his legal opinion that there is a high likelihood that would be found unconstitutional the way it is currently drafted. MR. BALDWIN indicated he doesn't have an unpublished Supreme Court opinion with him. REPRESENTATIVE MACKIE said his opinion would be fine. MR. BALDWIN said he thinks it raises a serious legal issue. REPRESENTATIVE MACKIE referred to the House Resources Committee version of the bill and asked Mr. Baldwin what his opinion is in terms of it's constitutionality in terms of the local hire provision. MR. BALDWIN said he thinks it has similar problems. He indicated he was very concerned when he reviewed the minutes that it felt that that bill was sufficient with out a severability clause. Mr. Baldwin said he thinks it should have a severability clause, at the very least, if anything is going to be done about local hire. It should be very clear. That way, we might have some success in avoiding an injunction that would stop the project. Number 1405 REPRESENTATIVE MACKIE referred to the original version of HB 548 and asked Mr. Baldwin if, in his opinion, that bill is workable and if it would meet the tests of whether or not it would be constitutional. MR. BALDWIN said, "Yes." He also said he thinks the provisions of the lease were very carefully drafted and reviewed by his office. He said it was very carefully worded to not create the situation where the leaseholder was forced to do anything. He said it has been their perception that the leaseholder is very inclined towards Alaska hire and that we, as a state, needn't do anything to force them to do anything beyond that. REPRESENTATIVE MACKIE referred to looking at the local hire decisions that have been thrown out in the past in terms of what previous legislatures have tried to do and asked if there is any way to deal with local hire that would meet those court tests, and had there been a way wouldn't it be in the bill. He said there are a lot of people that would like to include local hire language in the bill and he would also like to see that, but if it can't be done, it can't be done. He asked, "If there was a way, would you not have had it in this particular language?" MR. BALDWIN said he knows the Administration feels just as strongly about local hire as anybody else does. He said he presumes those who negotiated the lease pursued all the avenues they could pursue to try and achieve that. There have been cases such as Hickland v. Orbeck, which is pretty much on point with trying to make leaseholders of oil and gas leases to employ local hire in their activities and weren't successful in that case. Number 1510 REPRESENTATIVE MACKIE said he would infer from Mr. Baldwin's comments that the only thing that works to accomplish this project is the original version of HB 548 which was submitted and agreed to by the Administration. MR. BALDWIN responded, "I'm not saying that we have all the answers or that somebody - that there isn't somebody out there more creative, but we think that's a safe approach to implementing the project." Number 1536 CHAIRMAN BARNES said, "Mr. Baldwin, before I go to the next person I want you again to state for the record whether or not the whole key is whether BP voluntarily commits to our Alaskans and whether BP voluntarily commits to build modules in Alaska." MR. BALDWIN said there are certain things that we can do as far as local hire goes, but they are subtle. In other words, we cannot directly mandate percentages and that sort of thing. There are certain things we can do that are subtle. He said it appears to him that BP intends to do those things. Those things are requiring instate construction, they appear to agree to do that. They also appear to support Alaska as being the point of hire. Mr. Baldwin said those are the two things that we feel, as a state, we can mandate or do. The Administration believed they had those points covered in the lease agreement. Beyond that, you embark upon a course of conduct to require more than that which exposes you to protracted litigation over the validity of what you've done. Number 1623 REPRESENTATIVE GAIL PHILLIPS referred to the House Resources Committee version of the bill and said the committee put on sidebars in the last portion of the bill that all of the processes wouldn't go forward until the requirement for the local hire - local contractors, local vendors, local module building had been met. He asked Mr. Baldwin if when he was negotiating the contract, did the Administration - the department consider putting any kind of sidebars on this that would say the agreement is not going to go into effect until we see the positive results of this. MR. BALDWIN said he would like to defer that question to DNR. He noted he didn't sit in on those negotiations. CHAIRMAN BARNES asked Commissioner Shively to join the committee at the table. Number 1755 JOHN SHIVELY, Commissioner, Department of Natural Resources, came forward to answer Representative Phillips' question. He said, "In answer to Speaker Phillips' question we didn't, to my knowledge, not consider the kind of sidebars that you've put on it for the same kind of reasons I think that Mr. Baldwin talked about. We felt that we could not force the issue of local hire, that if we required it that it would be a problem for us constitutionally because it would be a state act. We tried to push the language in the agreement to the brink of what we felt would be acceptable constitutionally, recognizing as I've testified before that such language, as we could get, would not guarantee the state what the Governor wants, what I wanted, what we know the legislative leadership wants because of the discussions that - that you have had with BP." REPRESENTATIVE PHILLIPS said, "Mr. Commissioner, if you didn't consider sidebars, did you give any creditability or any discussion to the issue of creating incentives then if the company put these requirements into place. In other words, if we saw positive results on local hire, local vendors, modules built in Alaska, why didn't we put a process into place giving incentives for doing that and tie the incentives into that rather than a blanket release right at the very beginning?" COMMISSIONER SHIVELY responded, "Madam Chairman, Speaker Phillips, I think that you need to recognize sort of what we negotiated over and then what I think is of major sort of public concern. For the department, my major concern was that the economics of the deal made sense to the department and those economics have to do with the risk that we have under the net profits royalty, the need for certainty, the need to be able to get the leases back and rebid them. That was to me really the negotiated part of the agreement and that was important for the state. Local hire was important as a piece of what I think people wanted, but if the deal could not stand on the economics, then the department shouldn't be doing it just for local hire. And so we spent the bulk of our time negotiating on the economic issues (indisc.)." REPRESENTATIVE PHILLIPS said it wasn't the matter that they turned down the issue of incentives, it was a matter that they looked at a different aspect of the project instead. COMMISSIONER SHIVELY said that is correct. Number 1820 REPRESENTATIVE BILL WILLIAMS said, "Along those same lines (indisc.) incentives goes, is it too late to (indisc.) to the agreement?" COMMISSIONER SHIVELY said he thinks the answer is probably yes. From his understanding of BP developing incentives for hire requires a variety of measures that he thinks are difficult to agree on, not the first of which is "What is an Alaskan?" Commissioner Shively referred to the Senate Resources Committee and said they gave some very specific guidance as to what they consider Alaskan in terms of how you count them, and what's an Alaskan, constitutionally, are probably two different things. He said he would be willing to listen to the ideas people have about how you do those incentives. He said the Native community has probably been the most active in terms of negotiating local hire commitments of an incentive system in that regard. He referred to Speaker Phillips question and said it is just something that he has really not seen dealt with in that way and if they didn't do it, that was at least one of the reasons. Number 1900 REPRESENTATIVE GENE KUBINA referred to the discussion that has been going on about how to do this and asked if before this ever came to the legislature couldn't the Administration have said to BP, "You know if you signed a project labor agreement for labor and Native hire, before we ever got to the legislature, we wouldn't have to fight this local hire issue." Representative Kubina said he says that because it seems like when there is project labor agreements with the unions the percentage of Alaskans rises significantly, and yet that wouldn't have been part of any lease agreement. It could be simply said, "And then when that's done, we'll forward this to the legislature." He asked if there is anything legally that would have stopped them from doing that. MR. BALDWIN said in the last couple of years we have seen development along the area of project labor agreements and it has been mostly favorable towards their implementation. He said there was a time when we were reluctant to get involved in that because of the uncertainty, but that uncertainty is starting to be resolved at least on the lower court level in Alaska. He noted he is aware of a recent case where federal court found a project labor agreement to be nondiscriminatory. One of the side benefits, not a direct benefit of a project labor agreement, is the fact that whatever the union does as far as maintaining resident membership you can benefit from that in an indirect way. So it has had an indirect effect of encouraging local hire just as it is required under state construction contracts that the point of hire be through local union halls. That way if the unions are somewhat discriminatory, that wouldn't be state action, it would be private action. He said that is how you get there. Mr. Baldwin noted he doesn't know what BP's labor picture is and how much of the work they do is unionized. It would take an analysis of that before we could say that it would definitely solve this problem. Number 2014 REPRESENTATIVE KUBINA asked Commissioner Shively if this is something that ever entered into the discussion at all. COMMISSIONER SHIVELY indicated it wasn't discussed. He stated, for the record, "At least the information that I have -- that the Department of Labor did when they did their statewide local hire analysis, not only of the oil industry but all industries that it is not necessarily true that union contractors, at least by the way they measure it, do significantly better than nonunion. And that may be somewhat because of the measure that the Department of Labor uses which is running the employment list against the permanent fund dividend list, which is how they come to that analysis. But at least under that analysis, I was surprised to see that there was not. In fact, in one company I know of the nonunion arm had a better local hire - Alaska hire record that the union arm. I don't think the state, in the past, has been really in the business of mandating or suggesting project labor agreements. That's generally been left to negotiations between industry and unions." Number 2073 CHAIRMAN BARNES asked Commissioner Shively if he has seen the document entitled, "First Amendment to the Northstar Unit Leases Between the State of Alaska and BP Exploration (Alaska) Inc." COMMISSIONER SHIVELY indicated he has. CHAIRMAN BARNES referred Commissioner Shively to page 12 of the document asked him to acknowledge, for the committee, that it was executed by him. COMMISSIONER SHIVELY acknowledged it was executed by him. CHAIRMAN BARNES noted it was also signed by E.M. Luttrell, Vice President, BP (Alaska). She asked if the document was also executed for him voluntarily. COMMISSIONER SHIVELY answered in the affirmative. Number 2140 CHAIRMAN BARNES referred to page 5, (10) and read, "Paragraph 41 is replaced in its entirety as follows: 41. EMPLOYMENT OF ALASKAN RESIDENTS." She asked Commissioner Shively if this was language that was voluntarily agreed to by him and by BP. COMMISSIONER SHIVELY said it was. CHAIRMAN BARNES asked Commissioner Shively to look at page 7, (5), and read, "Paragraph 31 is replaced in its entirety as follows: 31. EMPLOYMENT OF ALASKAN RESIDENTS." She asked Commissioner Shively if this was language that was voluntarily agreed to by him and by BP. COMMISSIONER SHIVELY responded in the affirmative. Number 2195 CHAIRMAN BARNES referred to page 11 and read "These amendments take effect when and if an Act(s) substantially similar to the act, attached as Exhibit D and incorporated by reference, takes effect. This amendment is dated for reference purposes of March 22, 1996." She noted it is signed by Commissioner Shively and Mr. Luttrell also. COMMISSIONER SHIVELY confirmed the signatures were his and Mr. Luttrell's. CHAIRMAN BARNES said Commissioner Shively and BP (Alaska) actually voluntarily agreed to all that is in the document. COMMISSIONER SHIVELY said, "Yes, Madam Chairman, we did." CHAIRMAN BARNES asked the committee members to read the pages of the document she so noted. She gave the committee members a proposed committee substitute and asked them to review it, recognizing that Commissioner Shively has testified that the language before the committee in the contract was put there voluntarily by BP. There was not any coercion by the state of Alaska or Commissioner Shively. Chairman Barnes said she would give the committee members a separate document that relates to legislative intent. She noted that a lot of the House Resources Committee's version of HB 548 is not included in the proposed substitute. The reason it is not included is because she has an opinion from Jack Chenoweth that it was unconstitutional. She noted that as long has she has been in the legislature she has never knowingly participated in doing something that was unconstitutional. Having said that, we have to look for a way for the legislature to accomplish its end in a constitutional manner. She stated a constitutional manner is that which BP and the state of Alaska entered into voluntarily that is now part of the public record of this committee and is so stated under the signature of both BP and the commissioner of the Department of Natural Resources. CHAIRMAN BARNES referred the committee members to page 3, line 22, and said the committee will find that directly from the agreement and the lease amendments entered into by BP and the state of Alaska it is reprinted in the legislation verbatim. In that regard, she said she also has a letter from John Morgan, President, BP (Alaska), Incorporated. She asked Commissioner Shively if he had the opportunity to review the draft committee substitute. Number 2470 COMMISSIONER SHIVELY said he has had an opportunity to review it. CHAIRMAN BARNES asked him if he would say that it contains the language of the leases that were signed by him. COMMISSIONER SHIVELY indicated it looks like it contains the language, but noted he hasn't done a word-for-word analysis. TAPE 96-2, SIDE B Number 007 CHAIRMAN BARNES said she tried to provide some additional legislative intent. She noted that we all know that legislative intent does not have the force of law. Chairman Barnes said they have tried to make some clarifying language in the legislative intent which we understand is nothing more than that clarifying language. That is whole the problem with the original bill. The whole bill is legislative intent that means nothing except for ratifying a deal with (indisc.) in a piece of legislation, other than the reference of the contracts. She asked if there were any questions. Number 051 REPRESENTATIVE MACKIE said he would like to ask Mr. Baldwin a question. He referred to the terms of the committee substitute and said by including the language of the agreement, which was voluntarily agreed to, does it pose any problems by putting it in the legislation the way that it was drafted in either the Senate or House Resource versions or does it take away that particular problem. MR. BALDWIN said as he understands it, they are the exact provisions that were negotiated. So we can say that creates any problem other than the one we created for ourselves. REPRESENTATIVE MACKIE said it is one thing to put it into an agreement, but it's another thing to put it into a bill or into statute. He asked if that is a different issue. MR. BALDWIN said the issue would be if we wanted to go back and amend it. They would then have to go back to the legislature to change the law. He said, "Say something happened, a Supreme Court opinion came down that changed the law somewhat. Then we would be constrained to come back to you to change it and that's up..." Number 115 CHAIRMAN BARNES noted that is done all the time. REPRESENTATIVE MACKIE asked if the language in the bill, the fact that it's in a bill, it's statute with provisions of local hire, does it achieve what the Chair is trying to achieve by not having the same constitutional problems with local hire provisions that are currently in the Resources version. Number 125 MR. BALDWIN said if there is a problem with the language, which he doesn't think there is, whether it's done by the legislature or done by the Department of Natural Resources it is all state action. He said he doesn't think it would make it any worse that it was done by the legislature as opposed to the department. CHAIRMAN BARNES said she would not think of putting anything in the bill that the department and BP hadn't agreed to voluntarily. MR. BALDWIN indicated he knows that and said he is glad we have made that record today. CHAIRMAN BARNES said she worked really hard at. MR. BALDWIN said she has done a very good job in doing that. CHAIRMAN BARNES noted the letter from Mr. Morgan was also voluntarily and says essentially the same thing. Number 176 REPRESENTATIVE KAY BROWN distributed an opinion to the committee members. She said she appreciates the committee's attention to the constitutional issues in the legislation and she believes the local hire is one of those. She noted there are others that she hopes they will also consider. Representative Brown said she asked Mr. Chenoweth to identify what legal issues he sees that are significant with respect to the legislation before the committee. She said it detailed in a memorandum and urged the committee members to take a careful look at it. The point raised in number 1 has been brought up before, but she thinks it is worth repeating that the proposal before the committee is not authorized under current law. She said she doesn't believe that the department or the commissioner had the authority to enter into the agreement that they have entered into. It is pointed out in Mr. Chenoweth's memorandum that competitively bid contracts may not be materially amended. It appears that the modification in this manner is material by virtually any measure. That then brings us to the issue of whether the legislature can cure this illegality with another act. She said she believes there are two constitutional provisions that would invalidate the legislation as it is presently drafted. One is pointed out on page 2 of Mr. Chenoweth's memorandum deals with Article 8, Section 17, identified as the uniform application clause. She referred to "Shepherd v. Department of Fish and Game, a 1995 case and said that provision basically states, "Laws and regulations governing the use or disposal of natural resources shall apply equally to all persons similarly situated with reference to the subject matter and the purpose to be served." She explained he goes on to point out that this bill references only the Northstar leases and no mention is made of any other leases that might similar problems or might warrant reformation. That should be carefully considered. REPRESENTATIVE BROWN said she further questioned Mr. Chenoweth about his finding on the local or special acts limitation. He told her he had not considered the point of view that she raised and that he would reconsider it and would put something in writing when he has had a chance to review. Representative Brown referred to her opinion and said it is that Abrams v. State which is, as far as she knows, only case interpreting this local or special acts limitation in the constitution is a completely different situation. It involved whether there could be a municipality formed at Eagle River and that the reason the court had to come up with this balancing test was because a general law could not be made applicable. It was in fact a localized situation which then led them into nonetheless having to go through this balancing test. Representative Brown explained she thinks the clear language of the constitution says if a general law can be made applicable, the legislature shall not pass a special act. If it means anything, surely it must apply in a situation like this one where we are passing special benefits for one company. She stated she believes this legislation has serious flaws constitutionally and doesn't believe that the legislature can go back and cure this agreement in this manner. She urged the committee members to take those things into account as they further deliberate on this bill. Number 335 CHAIRMAN BARNES said she does believe the legislature is empowered to make this legislation constitutional because we are the sole controller of the resources in this state. She indicated that if the legislature chooses to make an amendment and can show the public purpose than the legislature can pass this bill. It must be shown how it will serve the public purpose of the people of the state. REPRESENTATIVE BROWN said, "Madam Chair, I would agree that we can do anything we can get 21 votes to do. Whether it is constitutional or not I think is a debatable point. The constitution does impose requirements on us as we serve as the trustee of the people's resources. And it does say very clearly that if you can make a general law applicable no local or special act shall be valid. And I believe, in this case, there is many ways that we could make a general law applicable and in fact that is one of my concerns about this whole situation is the precedence that were setting and how we are going to deal with our outstanding net profit share leases and all the other companies and lessees that have competitive contracts. Are we now to throw out our competitive bidding system and have only a negotiated system where the commissioner can go and in secrete completely renegotiate every competitive lease that we have? I think that would be most unfortunate. And I do believe that we, the legislature, are also subject to the constitution." Number 410 CHAIRMAN BARNES stated she absolutely agrees with Representative Brown and she doesn't believe that the commissioner, under present law, could go renegotiate these leases without ratification by the legislature. Number 420 REPRESENTATIVE MACKIE asked if you can't have special legislation when a local act can be applicable. REPRESENTATIVE BROWN clarified if a general act can be applicable, you can't have special legislation. REPRESENTATIVE MACKIE said he thinks that if they could have done it under a general law, they would have just done it without it coming before the legislature and that is why it is before the legislature to adopt. REPRESENTATIVE BROWN said that isn't her understanding. She said she thinks that was a choice they made to go as a special act as opposed to a general act. She said she believes it is clearly possible to make a general act and that would be the constitutional way to proceed if the legislature chooses to do so. Number 454 REPRESENTATIVE KUBINA referred to Mr. Baldwin's letter dated March 26, page 3, under 2, he actually makes a statement, "The department intends to seek the narrowest possible provision to specifically authorize amendments to only the Northstar leases." He said the way it is stated it is like Mr. Baldwin was given direction before he wrote the letter that would be the course of action. Number 480 MR. BALDWIN responded, "Yes, if it was legally permissible to do that." REPRESENTATIVE KUBINA said, "Well maybe my question really then is why that way? Why wasn't it brought as more like 207 or something where something more general was on the small general act that would allow not only what was done in 207, but again what could be done to include this in a 207 type situation?" Number 506 COMMISSIONER SHIVELY said he would like to answer the question. He said this really is a unique situation. First of all, there aren't that many leases on the North Slope that were bid with net profits as a variable. This is the only oil field which is basically set with four of the five leases based on a very high net profits. Commissioner Shively said they think it is different and is a situation that can be dealt with and they believed that it was a situation that needed to be dealt with. He said they could have had a general piece of legislation that, had it passed, would have allowed them to go and negotiate an agreement with BP if they met those standards. He referred to terms of the timing development and said timing is critical here because of the problem on the development account and how fast it is earning interest, it really gives BP an incentive to delay development, so the state has an incentive here. This was the way to get it done as quickly as possible and perhaps have construction early this fall. That is why they did it. Although there was discussion about a more general piece of legislation, this was the route they took. Number 573 MR. BALDWIN referred to the terms of the legal rhetoric and said they're not similarly situated. In addition, the Abrams case that was cited by Representative Brown is not the only case on local and special legislation. Another case he cited in the opinion was State v. Lewis which involved a land trade, specific acreage located in the railbelt area. There was a bill authorizing that specific land trade. One can always argue that you can do a general law authorizing land exchanges between private corporations and state lands, but the court reasoned in that case that it did not violate the local and special legislation prohibition because it was a matter of statewide interest. That case came along after the Abrams case. That is part of the reason for their opinion. REPRESENTATIVE KUBINA asked what would happen to BP's time line to meet the sanction, which understands is their corporate headquarters commitment of the funds to the project. He asked what would happen if the legislature left and somebody immediately filed a lawsuit. MR. BALDWIN said it depends on the kind of lawsuit filed and what was asked for. If what was asked for a preliminary injunction and it was granted, then work would stop. Otherwise, he would guess that BP would have to assess the litigation risks they have and decide whether or not they wanted to proceed with that litigation in front of the court. Number 670 REPRESENTATIVE MACKIE referred to an amendment that will soon be offered to the committee substitute and stated it says the amendment is drafted to Version M and the committee is working with Version O. CHAIRMAN BARNES said the committee will adopt 2, as a working draft so she can distribute them. She said she will then put them in the correct order. Number 707 REPRESENTATIVE PHILLIPS moved to adopt CSHB 548, Version O, dated 4/29/96 as the committee's working document along with Amendment M- 1, dated 4/29/96. CHAIRMAN BARNES asked if there was an objection. Hearing none, it was so ordered. REPRESENTATIVE PHILLIPS referred to the issue of special legislation and the court's decision on the Abrams case, where the court recognizes the statute may effect only one of the very few areas and yet relate to a matter of statewide concern or common interest. She said the courts then could rule. If there were a lawsuit on this then the courts could rule that this is an issue of common interest that could be applied in any of these similar tax cases. Number 771 COMMISSIONER SHIVELY said he thinks all the court could do is say what the legislature had done was constitutional or unconstitutional. They couldn't extend this kind of agreement to other net profit leases. REPRESENTATIVE PHILLIPS asked Mr. Baldwin if he thinks they would give credibility if another entity came up and wanted this kind of a benefit. COMMISSIONER SHIVELY explained it would be somebody in a similar situation. There really isn't another oil field that looks like this with these kind of net profits on such a large portion of leases. He said he thinks they would first have to come to the commissioner and be turned down in terms of looking at it to say they hadn't been treated the same. Two of the existing leases that were bid this way with net profits as a variable are in the Duck Island Unit and are presently under production. Commissioner Shively referred to most of the net profit leases the state had and said the net profits were not the bid variable and that's the real difference we see in this situation. There are a lot of net profit leases, but with most of them the net profits were preset at like 30 or 40 percent. The bid variable was a bonus bid which is what they're accustomed to and there was also some kind of base royalty involved. This is somewhat of a unique situation and that's why he thinks it can be dealt specifically by the legislature. REPRESENTATIVE MACKIE asked Commissioner Shively if he has reviewed the working draft the committee has before it. COMMISSIONER SHIVELY said he has. REPRESENTATIVE MACKIE asked if he is comfortable that the work draft will accomplish what the original version did. COMMISSIONER SHIVELY indicated Chairman Barnes has said that it is the same words that are in the agreement. He said he thinks it accomplishes what the committee wants it to accomplish. It certainly got them as far as they thought they could go using the same words. "If it works for the committee, it works for us." Number 885 REPRESENTATIVE MACKIE said Commissioner Shively's concern was the constitutionality question of the local hire provisions, etc., that were added in other committees and not necessarily the particularly language to get us to the same result. COMMISSIONER SHIVELY said, "I think that the key in what the Chair has said repeatedly is that she is using language, including language that we had in the agreement, that talked about them voluntarily agreeing to do this as opposed to the legislature mandating it. I think that's the key difference is that they can voluntarily say as a business they've made this business decision. We as a state cannot say, `You have to make that business decision or political decision' or whatever you want to call it." Number 929 REPRESENTATIVE KUBINA asked Commissioner Shively if he supports the version of the bill before the committee. COMMISSIONER SHIVELY said he sees no reason why he couldn't support it. Number 945 REPRESENTATIVE JOHN DAVIES said he appreciates the amendment that the Chair has put before the committee in an attempt to get farther down the road to a commitment to Alaska hire, but he believes we can go a small step further. He said, "I think that that has do with putting in and, unfortunately, I appreciate the difficulty of actually amending the agreements. So what I'm proposing would amend the agreement, it would be language that would amend the agreement. I'm not sure there may be a way to finesse that, but anyway the proposal that I would suggest - that I would like you to look at is an amendment that I've prepared that would modify the base royalty based on the percentage of Alaska hire. And so that there would be a relationship between the percentage of Alaska hire and the base royalty that was in the contract. And what -- in my view, the advantage of this is of cause that, again, I think this is - it would be voluntary situation. It's an incentive. I think these have been found constitutional in other states and other jurisdictions that companies can choose to hire as many Alaskans as they want or not hire them, but once they've made that choice that has an effect on what the base royalty would be. I think that this also satisfies some of the, in my view, it satisfies some of the constitutionality challenges to the contract from the point of view of whether we are getting a fair value for the - from the state's resources for all the people of the state of Alaska that would establish a relationship between the benefit that we're scribing to Alaska hire and the extraction of our resources. So I just wanted, Madam Chair, the opportunity to put that consideration on the record and to indicate that I have prepared an amendment and I hope that it could be copies and distributed to the members of the committee for their consideration and hope to have an opportunity to discuss it with you all at a future date." Number 1095 CHAIRMAN BARNES said she would have the amendment copied and distributed to all members of the committee. She noted there is floor session at 7:00 p.m. It would give the committee a chance to review the amendment and then the committee would reconvene after session. REPRESENTATIVE PHILLIPS referred to page 5, Section 3, of the work draft which relates to reporting provisions. She said she believes this is a very important part of the bill that has been quietly ignored and read from the bill, "The lessee, BP Exploration (Alaska) shall file with the commissioner of Labor at least every six months the reports that the commissioner of Labor determines are necessary to evaluate the lessees efforts described under the local hire provisions in the act." She said she thinks that is a very important to have in the bill. Representative Phillips asked that the committee consider a technical amendment that the commissioner of Labor should also send the report to the legislature. REPRESENTATIVE MACKIE asked if the committee would reconvene after session. He also asked if the amendment would be drafted into the bill at that time. CHAIRMAN BARNES indicated the committee would reconvene after session and the amendment would be included in the bill at that time. Chairman Barnes recessed the meeting at 6:30 p.m. CHAIRMAN BARNES called the meeting back to order and noted all members of the committee were present except Representative Kubina. Number 1277 ERIC LUTTRELL, Vice President, Exploration and New Developments, BP Exploration (Alaska), Incorporated, came before the committee. CHAIRMAN BARNES asked Mr. Luttrell if he has had an opportunity to read the draft CS adopted by the committee. MR. LUTTRELL indicated he has read the CS. He said in their reading of the bill he thinks the bill will do what everyone is trying to achieve. He requested that he have a chance to review it one more time. Number 1341 REPRESENTATIVE ELDON MULDER asked Chairman Barnes if she would be prepared to explain to the House Finance Committee the changes made in the bill the following day. CHAIRMAN BARNES indicated she would have no problem doing that. She asked if there were any questions of Mr. Luttrell. There were no further questions of Mr. Luttrell. Chairman Barnes asked if there was anyone else wishing to give testimony. There being none, she indicated Representative Phillips has a proposed amendment. Number 1390 REPRESENTATIVE PHILLIPS said she would propose a technical amendment on page 7, line 26, Section 4, where it says, "BP shall file with the commissioner of Labor at least every six months the reports that the commissioner of Labor determines are necessary." She said she would like to add a phrase after the word "commissioner" add a new sentence, "The commissioner shall submit these reports to the legislature." Representative Phillips moved the amendment be adopted. CHAIRMAN BARNES asked if there was an objection. Hearing none, the amendment was adopted. She asked if there were additional proposed amendments. Number 1480 REPRESENTATIVE WILLIAMS asked for an explanation of page 6, line 17, "The lessee shall furnish the Department of Labor a quarterly report regarding employment of Alaska residents in the leased area in compliance with regulations." He referred to page 7, Section 4, "The lessee, BP (Alaska) Exploration, Inc., shall file with the commissioner of labor at every six months." He asked if quarterly is different than every six months. CHAIRMAN BARNES said, "Well I think that the first part you're addressing is in the intent language and these don't have to be as concise or conclusive as the ones that will be filed under the law itself." Number 1552 REPRESENTATIVE PHILLIPS said she thinks this provides us a very good alternative and method of getting on the record everything that the legislature wanted to make sure was on the record, that being the fullest ability or the fullest requirement for making sure that we had existing residential hire on this project. She indicated she wants to stress the phrase "existing residential hire" for the record. She said she doesn't mean that we are going to be bringing people up from the Lower 48, giving them an Alaska drivers license and calling them a resident. It also gives us the strongest language that we can ensure to make sure that those vendors and suppliers in Alaska are going to get the first crack at getting the contracts on this job and to the best of anybody's ability that those modules will be built in Alaska. She said she thinks it is very important that the record, throughout these proceedings and hearings, is very clearly stated in all the committees that is the intent of the legislature. We're not interested in doing incentives, tax breaks, giving royalty breaks or anything unless we are guaranteed that the people of Alaska will be put to work. Representative Phillips stated she thinks we have gone as far as we can in this amendment without violating the constitution. That message is very very clearly on the record. She indicated she will be reading those six month reports on a regular basis. Number 1670 REPRESENTATIVE GARY DAVIS referred to the severability clause and asked how would severability would be enforced as far as do you take out a phrase, do you take out a section, do you take out a paragraph. He said his concern is the authorization to amend the lease and the employment discussions are in the same subparagraph. CHAIRMAN BARNES said if this should go to court, and perhaps with the new bill it won't, of the court found that one section of the bill or a portion of a section is unconstitutional, it would be severed from the bill and the rest of the bill would remain in tact. REPRESENTATIVE DAVIS asked if it would be a section of the bill or a portion of a section. CHAIRMAN BARNES said she thinks if the court can find anything. She asked Mr. Baldwin to come forward and clarify that. Number 1750 MR. BALDWIN explained the way he sees severability working here is that it reflects the intent of the committee that if the local hire provisions in the bill were found to be unconstitutional you would still intend that there be a net profit share reduction and that the state would still receive all the benefits from the net profit share reduction. That is the intention that we want on the record. He said, "And I'm not quite sure what words or phrases would be dropped from the bill or would be dropped - be stricken by the court, but that's the important thing to get on the record is it's the committee's intent and hopefully the legislature's intent that if one - that if local hire is found to be or provisions relating to local hire are found unconstitutional, or anything else. The main thing is that the net profit share lease thing - a provisions would stand." REPRESENTATIVE DAVIS explained that was his concern and that is his intent because the provision to amend is in the same subparagraph as the employment provisions. Number 1849 REPRESENTATIVE MULDER referred to the relation to the revision of the contract and asked if the legislature approves legislation and if the revised contract is signed by the state and BP, what is the ability of the state to, in the future, readdress that contract again. He said he thinks that it has been very clearly stated on the record that to the extent constitutionally and legally allowed, we have put a moral obligation on BP to hire Alaskans, to create employment in Alaska. We have gone as far as we can go. CHAIRMAN BARNES explained the legislature hasn't put the moral obligation on BP, they voluntarily put it on themselves. Number 1910 REPRESENTATIVE MULDER clarified to the extent allowable, they have put the moral obligation upon themselves. He referred to the future and said if they do not live up to the moral obligation, what is the ability of the legislature to revisit the issue. MR. BALDWIN responded that there is a provision in Title 1 which states that the legislature does not have the power to impair contracts. In other words, once a contract has been made with the state or anybody else, the legislature cannot go in and change it as they lack the power to do that. Mr. Baldwin noted the legislature is a very powerful body and there are many issues and areas that touch upon the leaseholder. The institution has a long memory. He said he guesses there is plenty of opportunity, but not in connection with this particular contract. He said a breach could be enforced if there is a breach, but this language is permissive and is voluntarily done by BP. Number 2010 REPRESENTATIVE MACKIE referred to page 7, Section 5, relating to severability and asked Mr. Baldwin if he feels that the language is adequate to state the legislature's intent. He said there is really nothing in the bill that mandates by the legislature in statue anything that hasn't already been agreed to. He said he doesn't see how something could be found unconstitutional with the bill the way it is currently written because there is not a statutory requirement by the legislature to mandate. Representative Mackie asked if that was accurate and if there is, where is it and does the severability clause still allow for it to go forward if one portion were to be struck down. MR. BALDWIN said he thinks it is always better to have an express severability clause then merely to rely on the one in Title 1, but by referring it in the bill he thinks it gets the point across to the courts that you do intend for it to severable. Title 1 says that it applies no matter what, even if the legislature doesn't refer to it, but our courts have said that it is just not good enough to rely on that. You have expressly relied on it and that is what he recommends be done. He said in answer to the broader question, he would be happy if nothing were said in the bill about local hire. Number 2129 CHAIRMAN BARNES again pointed out it's voluntarily. She said BP has put this in the leasings and, thus, in the legislation. REPRESENTATIVE MACKIE referred to the severability sentence in the bill and asked if it is adequate to achieve what we want it to. MR. BALDWIN indicated it is. He noted the sentence in AS 36.10.900 is a little bit different, but he thinks the sentence in the bill conveys the legislature's intent that it be severable. Number 2199 CHAIRMAN BARNES said language was also provided to her by someone else to look at. She read, "Section 4, Severability. If any of the provisions of this act are ultimately held unconstitutional, said provision shall be severable from the rest of this act." Chairman Barnes asked Mr. Baldwin if he would prefer that language or does the current language do what she thinks it does. MR. BALDWIN said he thinks it does. He said, "You want to make sure that you're not relying on just the one in title -- the provision in Title 1 automatically applying. By it's terms it does, but our court has said severability is a question of legislative intent and if we don't have any expression of legislative intent then we're not going to imply it. And so the fact that you have cited the severability clause and said that you intended it to be severable, I think you've been expressing your intent and it should be fine. The other one is fine to." REPRESENTATIVE PHILLIPS said, "If this does what we want it - it's in the language, lets go with it." Number 2310 REPRESENTATIVE JOE GREEN said he had spoke to Mr. Chenoweth earlier and he admitted there has been a change over the past few days about his attitude on the constitutionality of what the was done earlier. Representative Green said he thinks Mr. Chenoweth is of the same opinion everyone else is that there was a constitutional problem that has been cleared up the new language in the CS. Number 2360 REPRESENTATIVE WILLIAMS said he would ask the department to see if they can include some incentive language in for hiring. He noted there is some proposed language offered by Representative Davies, but he isn't prepared to offer it. He noted Kevin Becks put together a spread sheet. Representative Williams referred to the committee coming up with some incentives for hiring and indicated he believes the amendment would work a lot better. REPRESENTATIVE BARNES referred to the amendment that was provided by Representative Davies and said if she thought that she could get away with it constitutionally by adopting it she would, but she has been told she cannot. TAPE 96-3, SIDE A Number 036 CHAIRMAN BARNES referred to the fiscal note in the committee member's file and said it is her desire to nail down as clearly as possible, in every way possible the, language in the bill is voluntarily done on behalf of BP. So after the word "Northstar unit," she would like a statement made that would say "Incorporated by reference in this fiscal note is the attached letter dated April 29, 1996, BP Exploration, written to this committee by John C. Morgan, President of BP (Alaska)." She said they would incorporate the contents of the letter as an addendum to the fiscal note. Number 121 REPRESENTATIVE PHILLIPS so move that the BP letter, dated April 29, from John Morgan to Representative Barnes be included as an addendum to the fiscal note. She noted the committee members all have that letter. CHAIRMAN BARNES asked if there was an objection. Hearing none, the motion carried. Chairman Barnes noted the committee has adopted the work draft and said she would entertain a motion to adopt the CS. REPRESENTATIVE PHILLIPS moved to adopt the CS. CHAIRMAN BARNES asked if there was an objection. Hearing none, CSHB 548(WTR) was adopted. Chairman Barnes said she would entertain a motion to move the bill from committee with individual recommendations. Number 184 REPRESENTATIVE MACKIE said in regards to Representative Davies' amendment, Representative Davies was told the committee would address his amendment. CHAIRMAN BARNES indicated the committee just did deal with the amendment. REPRESENTATIVE MACKIE said he heard a few opinions, but the committee never dealt with the amendment. He said he does not support the amendment, but out of courtesy to Representative Davies he was told the committee would address the amendment. CHAIRMAN BARNES asked Representative Phillips to withdraw her motion. REPRESENTATIVE PHILLIPS withdrew her motion. CHAIRMAN BARNES said the CS has been adopted. She noted the committee was given the amendment by Representative Davies. Number 224 REPRESENTATIVE PHILLIPS moved Representative Davies amendment for the purpose of discussion. REPRESENTATIVE MACKIE objected to the motion. Number 260 CHAIRMAN BARNES said she is led to believe under the separation of power doctrine that the committee cannot deal in a constitutional manner with the amendment that was given to the committee by Representative Davies although she would be very happy to do so if she thought it was constitutional, but she doesn't. REPRESENTATIVE PHILLIPS agreed with Representative Barnes that she would also like to consider the amendment, but also the fact that it would change the contract is a (indisc.) that must be taken into consideration. REPRESENTATIVE BARNES said the question is the adoption of an amendment prepared by Representative Davies. She asked for a roll call vote. Representatives Mulder, Williams, Davis, Kubina, Mackie Phillips and Barnes were against the adoption of the amendment. So the amendment by Representative Davies was not adopted. Number 360 REPRESENTATIVE MULDER indicated he appreciates the work Representative Barnes has done. The second compelling reason for the legislature and state to address this issue is obviously the economics and the House Finance Committee will be looking at that the following day. He commended Representative Barnes for putting it clear on the record the cooperation between BP and their commitment toward local hire and local investment voluntarily. Representative Mulder made a motion to move CSHB 548 from committee with individual recommendations and the accompanying fiscal note, as amended. CHAIRMAN BARNES asked if there was an objection. Hearing none, CSHB 548(WTR) was moved out of the House Special Committee on World Trade and State/Federal Relations. ADJOURNMENT CHAIRMAN BARNES adjourned the House Special Committee on World Trade and State/Federal Relations meeting.