MINUTES SENATE FINANCE COMMITTEE April 12, 1994 9:05 a.m. TAPES SFC-94, #67, Side 1 (000-end) SFC-94, #67, Side 2 (end-000) SFC-94, #69, Side 1 (000-750) CALL TO ORDER Senator Drue Pearce, Co-chair, convened the meeting at approximately 9:05 a.m. PRESENT In addition to Co-chair Pearce, Senators Rieger, Kerttula, Jacko and Kelly were present. Co-chair Frank and Senator Kelly joined the meeting after it was in progress. ALSO ATTENDING: Senator Judith Salo; Donald Stolworthy, Director, Charitable Gaming Division, Department of Revenue; Tom Dow, Vice President of Hotels, Princess Cruises; David Rogers, legal consultant to Senate Finance Committee; Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources; Ken Boyd, Deputy Director, Division of Oil & Gas, Department of Natural Resources; Jack Chenoweth, Attorney, Legislative Legal Counsel, Division of Legal Services, Legislative Affairs Agency; Susan Sorensen, fiscal analyst, Legislative Finance Division; representatives of the media, aides to committee members and other members of the legislature. VIA TELECONFERENCE: Mary Ann Lundquist, Assistant Attorney General, General Civil Section, Department of Law, Anchorage. SUMMARY INFORMATION CSSB 67(FIN): An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date. Scheduled but not heard. (Rescheduled for April 14, 1994.) CSSB 308(RES): An Act modifying administrative procedures and decisions by state agencies that relate to uses and dispositions of state land, property, and resources, and to the interests within them, and that relate to uses and activities involving land, property, and resources, and to the interests within them, that are subject to the coastal management program when the use or activity is to be authorized or developed in phases; and providing for an effective date. Amendments 1 through 10 were ADOPTED for incorporation within CSSB 308(FIN) work draft "U". David Rogers, legal consultant to Senate Finance Committee; Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources; and Jack Chenoweth, Attorney, Legislative Legal Counsel, Division of Legal Services, Legislative Affairs Agency, spoke to the work draft. Mary Ann Lundquist, Assistant Attorney General, General Civil Section, Department of Law, testified via teleconference from Anchorage. CSSB 308(FIN) was REPORTED OUT of committee with a "do pass," with a fiscal note for the Department of Natural Resources for $34.2, and zero fiscal notes for the Department of Fish & Game, the Department of Environmental Conservation, and the Office of the Governor. SB 370: An Act providing an exemption from gambling laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state outside of ports; defining `cruise ship'; and providing for the licensing of certain cruise ships before they can conduct gambling in the offshore water of the state. Tom Dow, Vice President of Hotels, Princess Cruises, testified in support of SB 370. SB 370 was HELD in committee. CSHB 199(O&G) am: An Act relating to the exploration and production of oil and gas and related hydrocarbons, to oil and gas exploration licenses, and to oil and gas leases in certain areas of the state; and providing for an effective date. SCSCSHB 199(FIN) work draft "Q" was ADOPTED. David Rogers, legal consultant to Senate Finance Committee; Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources; and Ken Boyd, Deputy Director, Division of Oil & Gas, Department of Natural Resources, spoke to the work draft. Amendments 1 and 2 were withdrawn. Amendments 3, 4, 5, and 6 were ADOPTED. SCSCSHB 199(FIN) was REPORTED OUT of committee with individual recommendations, and a zero fiscal note for the Department of Natural Resources. CS FOR SENATE BILL NO. 308(RES): An Act modifying administrative procedures and decisions by state agencies that relate to uses and dispositions of state land, property, and resources, and to the interests within them, and that relate to uses and activities involving land, property, and resources, and to the interests within them, that are subject to the coastal management program when the use or activity is to be authorized or developed in phases; and providing for an effective date. (This portion of the meeting was transcribed by Alaska- Juneau Court Reporting & Secretarial Services due to a request for a verbatim transcript by Senator Kerttula.) The following is verbatim: EXCERPT OF PROCEEDINGS CO-CHAIR PEARCE: Call Senate Finance Committee to order. It's Tuesday, April 12th, about seven minutes after 9:00 in the morning. Present at the table are Senators Rieger, Kerttula, Sharp, and Pearce. Senator Jacko has just joined us. This morning, we're going to bring Senate Bill 308 back before the committee. We do have proposed amendments. I'd like to move (it) this morning. We also want to bring House Bill 199 back. I believe Senator Kerttula has some proposed amendments. I'd like to move that today. The Department of Natural Resources is ready to give us an update on Senate Bill 67, the Mental Health Trust amendments. And then we have noticed Senate Bill 370, allowing gambling on cruise ships. It's not my intention for 370 to move today; however, I would like to do the overview. And I noted that Mr. Dow is in the audience. Tom, are you just here for the day? MR. DOW: Yes. CO-CHAIR PEARCE: You hope. Okay. Well, we will try to -- what we'll maybe do is do that overview before we go to mental health, and that way you can go on back. SENATOR KERTTULA: I've got my files. My calendar said one group of bills. [Indisc.] a couple of minutes ago said some other bills. I have to go downstairs and get my file on 308. That's where ... CO-CHAIR PEARCE: Okay. SENATOR KERTTULA: ... my amendments are. CO-CHAIR PEARCE: That's fine. Okay. We'll bring 308 first. We have David Rogers and Jim Eason at the table, and we do have proposed amendments in your packet that have been logged in. There have been no changes to the CS that we adopted. We adopted version (u); isn't that correct Billy. MR. BILLY: Yes. CO-CHAIR PEARCE: We adopted version (u) and there was an errata, as we noted, and it was a major one, on page 7, lines 30 and 31. The drafter deleted the language shown and the Department's responses to those comments. It was never the committee's intent that that be deleted. And so the first amendment is to actually reinsert that language that went out as the errata. Any questions about that? Could we have a motion on that one? SENATOR RIEGER: Is it number [indisc.]? CO-CHAIR PEARCE: It's number 1; that's correct. They're actually logged in, Steve, on the lower right-hand corner. See? SENATOR RIEGER: Oh, Amendment Number 1, there it is. CO-CHAIR PEARCE: Correct. SENATOR RIEGER: I'll move Amendment Number 1 as [indisc.--simult. speech]. CO-CHAIR PEARCE: Okay. There's a motion on Amendment Number 1. Hearing no objection, Amendment Number 1 has been adopted. Amendment Number 2, Mr. Rogers, Mr. Eason. MR. ROGERS: Thank you, Madam Chair. Just a general statement. These amendments are sort of a response to a number of concerns that have been raised at the last hearing and since. Number 2 basically says that the final best interest finding for an oil and gas lease sale has to be issued at least 90 days before the sale, instead of the current 21-day minimum requirement. CO-CHAIR PEARCE: That was Mr. -- the man from Tanana Chiefs, Walleri ... MR. ROGERS: I believe that was the request of Mr. Walleri, Madam Chair. CO-CHAIR PEARCE: Yeah. MR. ROGERS: Mike Walleri. CO-CHAIR PEARCE: Right. It was Mr. Walleri's request. And, Mr. Eason, does that work for the department? MR. EASON: That does work, Madam Chair. It was a valid concern that was pointed out under the law. We've always been able to issue our final findings as late as 21 days before the action. But in this case, by proposing new language in SB 308 that addresses appeal rights, there was the potential for a conflict between having your full opportunity to pursue appeals if a department or if a division issued a decision late, so that there was less than 30 days to proceed. And so to avoid that problem, an amendment to make it clear that we will issue those decisions at least 90 days early before the disposal, is, I think, appropriate. CO-CHAIR PEARCE: Okay. SENATOR JACKO: Question. CO-CHAIR PEARCE: Senator Jacko. Did you move the amendment? Nobody's moved it. We need a motion for the amendment, then we'll call the question. SENATOR JACKO: I move the amendment, Madam Chair. CO-CHAIR PEARCE: Okay. Amendment Number 2 has been moved. Is there any objection? Okay. Two has been adopted. MR. EASON: Shall I proceed, Madam Chair? CO-CHAIR PEARCE: Yes. SENATOR KERTTULA: Which amendment was that? CO-CHAIR PEARCE: Number 3. Amendment Number 3 to 308 to have ... UNIDENTIFIED SPEAKER: [Indisc.]. CO-CHAIR PEARCE: Okay. There's a motion on Amendment Number 3. Could we please have an explanation? MR. ROGERS: Yeah. Madam Chair, under the work draft version before you, only an agreed person submits written comments during the public review process can request reconsideration of a director's decision. This amendment expands this to include oral comments and oral or written comments incorporate by reference somebody else's comments, and this response to a concern expressed, I believe, by trustees at the last hearing. CO-CHAIR PEARCE: Questions? The motion on Amendment Number 3 has been made. Senator Rieger. SENATOR RIEGER: One more time, what does ... MR. ROGERS: It -- 308 says you have to submit written comments in order to qualify for -- to request reconsideration. The trustees thought that was a little narrow. So this expands it to allow the individual to submit written or oral comments, or incorporate by reference comments of another, so it sort of broadens the qualifications for filing a request of reconsideration. CO-CHAIR PEARCE: Senator Sharp. SENATOR SHARP: That last part of your explanation ... MR. ROGERS: Yes. SENATOR SHARP: ... or incorporate the comments of others, which would mean that they were never involved before, they just [indisc.--simult. speech]. MR. ROGERS: Well, you'd have to do it during the public comment process, so I could go in, Senator, and incorporate your comments by reference, as long as I either got that on the record during the public hearing or submitted a written comment incorporating your comments by reference during a public comment process, I'd be eligible to request reconsideration. SENATOR SHARP: But, you would have had to have been an active participant. MR. ROGERS: You'd to be there or submit the comment during the comment period. Yeah, so it doesn't change that basic requirement of participation. It just expands the way you can participate to make it easier for folks to get their points across. SENATOR SHARP: I could go in and say I agree with so and so on ... MR. ROGERS: Yes. SENATOR SHARP: Okay. MR. ROGERS: Yeah. As long as you did it within that time frame. CO-CHAIR PEARCE: Senator Rieger. SENATOR RIEGER: [Indisc.] first not to -- if he's going to [indisc.] this article from this person in California is something I agree with. That doesn't give the person in California the ability to come in there; it's only the person who actually showed up here. Adopting comments by reference only applies to the person. You, the adoptee, not the ... MR. ROGERS: Correct. That's the intent. SENATOR RIEGER: Okay. CO-CHAIR PEARCE: Okay. The motion has been made on Amendment Number 3. Is anyone opposed to Amendment Number 3? Okay. Amendment Number 3 is adopted. Amendment Number 4. SENATOR JACKO: Madam Chair, make a motion to offer Amendment Number 4. CO-CHAIR PEARCE: Okay. Amendment Number 4 has been offered. Mr. Rogers. MR. ROGERS: Madam Chair. This amendment requires the director to discuss the reasons for a decision that a particular fact or issue was not material to the best interest determination. Under the current proposal, the director has to discuss his decisions regarding materiality. This would require the director to also explain why he determined that a factor issue wasn't material to the determination. CO-CHAIR PEARCE: And whose request was that? MR. EASON: That, I think, could best be described as a request of a lot of people. [Indisc.--simult. speech] generic request. CO-CHAIR PEARCE: Generic request. MR. EASON: We've heard this concern from literally the first hearing and continuing through, and we've really struggled with how to put it in words that that's what we really intend all along. We expect to be held to a standard of addressing what we think is material, as well as providing a written explanation when we don't think things are material to the particular phase that we are issuing a decision for. CO-CHAIR PEARCE: The question has been called. All those in favor? Senator Rieger, did you have a question? SENATOR RIEGER: Yeah, I did [indisc.]. CO-CHAIR PEARCE: Okay. Senator Rieger. MR. EASON: I [indisc.] understand it. SENATOR RIEGER: I'm trying to understand it. MR. EASON: It's not easy. SENATOR RIEGER: [Indisc.] look at the subparagraph (a). It says, basically, facts other than those that the director finds material are the ones that shall be discussed as to why they are not material, is that ... MR. EASON: It's -- go ahead. Sorry, Senator. SENATOR RIEGER: Does that mean you have to -- I mean, I can think of a fact that there is a twig [indisc.] on this branch in the lease sale area. I mean, that's a fact, but it's not material. Do you have to think of every twig? How does this work? MR. ROGERS: I'll let Mr. Eason respond, but yes, I think you probably would have to deal with a twig in that manner. MR. EASON: Madam Chair, members of the committee. If someone raises that fact to me, I have to acknowledge that that fact has been entered as part of the administrative process, and I would also have to provide a written explanation, from what I believe, that is immaterial or non- material to the decision. SENATOR RIEGER: Well, if [indisc.] facts which were raised during the hearing, where is facts defined as facts which were raised during the hearing? MR. EASON: You would have to read this, Senator Rieger, in context of the entire bill, so that -- with the protection that you must raise issues timely for appeal rights as well as the timing for when preliminary, best interest findings, and final best interest findings are conducted. And taken as a whole, I think that that issue isn't a problem, but you have to consider it in the context of the other requirements of this legislation as well as existing law that define when we have to hold the hearings and when the administrative process begins and ends. SENATOR RIEGER: You're convinced that this -- in context that this clearly does not include facts which were [indisc.]? MR. EASON: I believe I have convinced myself. I will be the first to agree with the committee and say that this is a difficult passage to understand. I originally drafted some language that, to me, appeared very simple and straight forward, and I think appeared simple and straight forward to everyone else working on this. And this is not a condemnation of the drafting, but it has been expanded to what you see today that makes it a little bit more difficult to understand. It's fathomable, but it takes some effort. CO-CHAIR PEARCE: Our drafters don't seem to be the most straight forward folks. Other questions on Amendment Number 4? The question has been called. All those in favor, signify by raising your right hand. We're back to that. Is anyone opposed? Okay. Amendment Number 4 has passed. Senator Kelly, by the way, has joined the committee. Amendment Number 5. MR. ROGERS: Madam Chair, there are a series of ... CO-CHAIR PEARCE: We do have a motion on Amendment ... MR. ROGERS: Oh. Sorry. CO-CHAIR PEARCE: ... Number 5 from Senator Jacko. Mr. Rogers. MR. ROGERS: There are a series of clarification amendments to the findings. Five is one of them. It essentially clarifies that the determinations of the state's best interest of those rendered under Title 38, actually Title 38.05. CO-CHAIR PEARCE: Any questions about that? That, I believe, the coastal districts had requested for clarification sake. Does anyone object to Amendment Number 5? Okay. Amendment Number 5 has been adopted. Number 6, Senator Jacko. SENATOR JACKO: Madam Chair, I move [indisc.]. MR. ROGERS: Number 6, Madam Chair, clarifies that we're talking about the scope of review. It was just an inadvertent deletion of the phrase "of review." Any questions? Anyone opposed to Amendment Number 6? Six is passed. Number 7, Senator Jacko. SENATOR JACKO: Madam Chair, I move Amendment Number 7. CO-CHAIR PEARCE: Okay. Amendment Number 7 has been moved. Mr. Rogers. MR. ROGERS: Seven, Madam Chair, simply adds economic effects to the environmental and sociological effects in finding number 11. What is an economic effect, in your opinion, Mr. Eason? MR. EASON: Economic effects, Madam Chair, members of the committee, include a number of potential effects, the most direct and immediate would be the receipt of bonus bids in the case of an oil and gas lease sale, for example. Potential effects from that include additional investment to explore with geophysical tools and drilling, and if you find something, the potential effects that arise from the royalties and taxes as well as private sector income that would result from that. CO-CHAIR PEARCE: The private sector economics would also come into play; is that correct? MR. EASON: That's correct. That is an economic effect that we would presume. CO-CHAIR PEARCE: Senator Kerttula. SENATOR KERTTULA: Potential downside economic effects, too, from a spill within the middle of the region that the affected [indisc.]. MR. EASON: Madam Chair. SENATOR KERTTULA: [Indisc.] economic effect. MR. EASON: Senator Kerttula, that is a potential but speculative effect, and it would not be our intent to estimate the under -- the context of this legislation. SENATOR KERTTULA: The other potential, too? Some of it's measurable. MR. EASON: That's correct. That's correct. SENATOR KERTTULA: [Indisc.] potential. MR. EASON: We would not count -- we would not total potential economic benefits nor potential economic deficits that we cannot reasonably foresee. SENATOR KERTTULA: What could you reasonably foresee in advance of nothing actually having been produced? MR. EASON: As far as financial impacts? SENATOR KERTTULA: [Indisc.]. MR. EASON: Very little, Senator Kerttula. CO-CHAIR PEARCE: I'm sorry, Senator Kerttula. I didn't hear your question. I heard the answer. SENATOR KERTTULA: Oh. All I said was that, what could you reasonably foresee as economic impact based on the answer that he made about potential for [indisc.] on the impact. And his answer was, very little. He couldn't see very much, which I think is an honest answer, but it might still lead to a good PR. CO-CHAIR PEARCE: Okay. Number 7 has been offered. Is anyone opposed to Amendment Number 7? Okay. Adopted. Amendment Number 8. Senator Jacko. SENATOR JACKO: Madam Chair, I move Amendment Number 8. CO-CHAIR PEARCE: Thank you. MR. ROGERS: Madam Chair, this language is designed to reinforce legislative intent, that a director should not divide or segment proposed projects simply to avoid a thorough review of the project. Page 3, line 4, Senator. I could read this, ... CO-CHAIR PEARCE: [Indisc.--simult. speech]. MR. ROGERS: ...if you'd like me to read the sentence in context. It's a little confusing; let's see if I can do it. Let's see. Eleven would read as amended - this is page 3, line 3 - consideration of a disposal as a phase of a development project is not intended to artificially divide or segment a proposed development project to avoid thorough review of the project, or to avoid consideration of potential future environmental, economical, of sociological effects, but rather is intended to allow for consideration of those issues when sufficient data are available upon which to make reasoned decisions. CO-CHAIR PEARCE: Which means what? MR. ROGERS: Jim. MR. EASON: It's -- as David said, the intent is to reinforce that we are not trying to set up a process, either in Title 38 or Title 46, where decisions about projects that are known, projects of which the parameters of that project are known well enough that you can issue one conclusive consistency determination will be avoided. It's for those situations only that we're proposing to segment the consideration for best interest findings and consistency determinations, in which you don't know all the potential pieces of that project. But, again, as we mentioned in earlier testimony on version (u), there are safeguards in that process that require that in order to segment, you have to make a determination that it is a project in which you do not know all the potential pieces, and you have to make sure that in that uncertainty you retain the right to condition future permits to make sure they're consistent with the Coastal Zone Management Act. SENATOR KERTTULA: Chairperson, that ... CO-CHAIR PEARCE: Senator Kerttula. SENATOR KERTTULA: ... two titles, or what? Mineral and oil and gas, that discussed? I understand Title 38 is everything in lands, but that's what you're talking about in both segments. MR. EASON: It would not be restricted -- Senator Kerttula, it would not be restricted to oil and gas and minerals. SENATOR KERTTULA: Okay. But includes both [indisc.], correct? CO-CHAIR PEARCE: Questions? MR. EASON: Lawyer's dream to me. CO-CHAIR PEARCE: Anyone -- well, at least it's in the finding. Anyone opposed to Amendment Number 8? Senator Sharp is. Anyone else? Okay. Amendment Number 8 is passed. Number 9. SENATOR JACKO: [Indisc.] move Amendment Number 9. CO-CHAIR PEARCE: Senator Jacko's moved Number 9. Mr. Rogers. MR. ROGERS: Madam Chair. This amendment requires the director to summarize and respond to all public and agency comments regarding all types of disposals in both the preliminary, if there is a preliminary, finding and the final determination. Now, this requirement only applies to final findings for oil and gas lease sales. CO-CHAIR PEARCE: Questions? Senator Rieger. SENATOR RIEGER: What is [indisc.] line 8? I don't see -- could you explain what that [indisc.--simult. speech] insertion is there, the one after [indisc.--simult. speech]? MR. ROGERS: Well, it's technical to get rid of -- what we've done, in fact -- by adopting Amendment Number 1, we're now repealing it, because this replaces those provisions in current oil and gas law. So it's now -- this requirement to respond to public -- to summarize and respond to public and agency comments, applies across the board to disposals of interest in land, not just oil and gas. So that's why you see the deletes as they're written in the bottom of this amendment. SENATOR RIEGER: Well, we just be missing something, but generally when you see a bill where the requirement of the bill is that there is bold faced material added and capitalized, bracketed material being deleted, it means it's existing law that you're amending. And when you look at page 8, line 8, you're still in that part of the language -- part of the statutes which is existing law and you're inserting deletion of material that doesn't appear to be there in the first place. MR. ROGERS: We went through this with the drafter. It does work. Trust me, Senator. The intent -- the drafter's intent - and we ought to put this on the record so it's clear - is to eliminate that language in existing law. The amendment, page 6, line 16, is designed to replace that and also apply to other disposals other than oil and gas. So the drafter contends that this does the trick, Senator ... SENATOR RIEGER: So is it -- the bill, misdrafted as it is now, is there existing language such as what's in the brackets that should have been written in on page 8, line 8, that's not there? MR. EASON: If you look at the existing bill and also consider Amendment Number 1, which added back the language under the department's [indisc.--simult. speech]. MR. ROGERS: It's there now, in any event. MR. EASON: By adopting Amendment 1, it's there in the bill. And now, by adopting Amendment Number 9, you will remove it and replace it with Amendment Number 9, the principal part of Amendment Number 9 which then will provide that the safeguards that were there before - in other words, that in oil and gas lease sales you have to respond to the public comments and respond to -- the department's response to them. You will be certifying that we not only do that for final best interest findings in oil and gas leasing, but we will do it for preliminary best interest findings and final best interest findings for oil and gas leasing, and we'll do it for all other findings for other disposals. MR. ROGERS: For other disposals. Which is why this section now appears in (e), which generally applies to all disposals as opposed to (g) which only applies to oil and gas disposals. CO-CHAIR PEARCE: Senator Rieger's question now, on page 8, line 8, the language that Mr. Chenoweth is deleting isn't. I see it up on page 6, line 16, he's adding it, but I don't see where he's taking it from. Was he working off a different draft? MR. ROGERS: No, he was working off this draft. He may have been in a hurry. I think he -- perhaps the way to deal with this is to simply move to delete the language in Amendment 1 and replace it with the language that's supposed to be on page 6, line 16, Madam Chair. CO-CHAIR PEARCE: Well, page 8, line 8, the language is already deleted after subsection. UNIDENTIFIED SPEAKER: What is Amendment 1, put it back in. SENATOR JACKO: Or move this [indisc.]. CO-CHAIR PEARCE: I don't -- [Indisc.] Title 38, please? MR. ROGERS: Madam Chair, I'm not going to -- I don't know, maybe we need Chenoweth. I don't want to redraft Mr. Chenoweth's amendment without his involvement. CO-CHAIR PEARCE: Okay. Why don't we do this. Senator Jacko, why don't you remove your motion on Number 9. Let's call Mr. Chenoweth. We'll go on to 10, and then we do have Senator Kerttula's amendment also. SENATOR JACKO: Okay. I would remove my motion ... CO-CHAIR PEARCE: Call Jack. SENATOR JACKO: [Indisc.] my motion on Number 9, and move Amendment Number 10. CO-CHAIR PEARCE: Okay. Number 10 has been ... SENATOR KERTTULA: Ten and eleven sort of tie together, but I think 11 stands apart from 10 all right. [Indisc.] looking at it. Same area. CO-CHAIR PEARCE: Okay. Ten has been moved. Mr. Rogers. MR. ROGERS: Madam Chair. If an agent -- basically, this amendment says that if an agency decides to phase a consistency determination, it has to describe its reasons for that phasing decision. This responds to a concern expressed by a number of folks over the last couple of weeks. But there, at a minimum, needs to be some discussion of phasing decision and justification for it. CO-CHAIR PEARCE: Questions? Is anyone opposed to Amendment Number 10? Okay. That has been adopted. Senator Kerttula, we'll call your amendment that you had distributed, Amendment Number 11. SENATOR KERTTULA: Yes. CO-CHAIR PEARCE: Okay. SENATOR KERTTULA: I move the amendment. CO-CHAIR PEARCE: Okay. There's a motion, Amendment Number 11. I'll object for discussion purposes. SENATOR KERTTULA: Chairperson. I still represents Sharp's copy [indisc.] back. Well, it just seems like we should be able to avoid phasing if review from start to finish is possible. Why get started and then stop the project? It could be costly, and if it's -- you know, if it's a reasonably foreseeable problem, why not review the project from start to finish rather than phasing. Phasing is the potential problem, and certainly you don't want to impose it when you can, pretty well, with knowledge, experience, and comparison, get the project authorized from beginning to end. MR. ROGERS: That's my amendment. CO-CHAIR PEARCE: And so you're going back -- that effectively would go back [indisc.--simult. speech] phasing? SENATOR KERTTULA: [Indisc.--simult. speech] I think 8, but as the testimony [indisc.] completely with 8. CO-CHAIR PEARCE: Senator Rieger. SENATOR RIEGER: Question for Mr. Eason and [indisc.]. When there is a phased project, is the lessee proceeding at -- you know, at his own risk and [indisc.] phases or is there an obligation by the state to proceed with the future phases? Does each phase stand alone with no assurance or guarantee that the next phase will happen? MR. EASON: Madam Chair. Senator Rieger. The language would require, before you can approve a phased project, the language of this bill would require that the state retain the authority to condition future uses. And we believe that that retained authority does send a signal to the lessee that he is proceeding at his own risk. In the case of oil and gas leases, we, for example, for a number of years, had a term that -- in the lease that explicitly addresses the outcome if the state ultimately makes a decision on some future activity that it is for environmental reasons or other unacceptable -- that it would result in unacceptable impacts. There is the authority that's explicit there to now allow those things to happen. But, of course, the down side of that is that you, because of the risk of takings of property, you are -- the state is exposure to some damages to those decisions. But that has been in law now for a number of years and that is the way it's handled. So the courts ultimately would determine if there is any damage and what that damage would be under, in the case of oil and gas leases, under those lease terms themselves, if there is a dispute. CO-CHAIR PEARCE: Excuse me. Further questions, Senator Rieger? Senator Salo, any time you have a question, feel free to jump in. Any other questions? Any other discussion? All those in favor of the amendment, raise your right hand. Anyone opposed? Motion fails. Senator Kerttula, do you have more amendments for 308? SENATOR KERTTULA: I don't have any more amendments until I hit the floor. CO-CHAIR PEARCE: Okay. Any other amendments? MR. ROGERS: We could cook a few up, Madam Chair. CO-CHAIR PEARCE: Pardon me? MR. ROGERS: I'm sure we could come up with a few more. CO-CHAIR PEARCE: In the absence of Mr. Chenoweth -- Senator Salo. SENATOR SALO: Thank you, Madam Chairman. I have a question to go back to one of the amendments that dealt with limiting later repeals if you hadn't been involved earlier in the process. And the Kenai [indisc.] attorney has listed some concerns about, and I have a communication from him. One of his concerns relates to that provision by saying that he's not sure it would be constitutional to limit the right of a person, any citizen in the State of Alaska, to appeal a decision about the assets of the State of Alaska, even if they hadn't been involved earlier in the process, especially if the final decision were particular egregious or, in fact, violated civil statute in some way. And I was wondering if you had a general response to that concern. MR. EASON: Madam Chair. Senator Salo. We do. I think -- I believe we have Mary Lundquist, an assistant attorney general, on line, and I think she has been the person that has been looking at that issue as it was raised by the Kenai Peninsula Borough last week. And I believe she's on line. CO-CHAIR PEARCE: We'll see. MS. LUNDQUIST: Madam Chairman, I am on line. CO-CHAIR PEARCE: Good. MS. LUNDQUIST: I'm Mary Ann Lundquist. CO-CHAIR PEARCE: Hi, Mary. Did you hear Senator Salo's question? MS. LUNDQUIST: It's regarding the Kenai Peninsula Borough letter? SENATOR SALO: Yes. MS. LUNDQUIST: We've been looking into that question, and if an exhaustion of administrative remedies is favored under law and this Senate Bill 308 doesn't include port review, no limits of questions to those that were addressed by the -- raised by the [indisc.] and addressed in the request for reconsideration, if there is a constitutional statement made said Senate Bill 308 was unconstitutional. If it was solely a constitutional question, then it would not fall under the exhaustion of administrative remedies, and such a claim could be brought separately before the Superior Court. If it's a question where the appellate would raise constitutional issues as well as factual issues, then they would have to exhaust these administrative remedies. But in the case where the Kenai Peninsula Borough's concern seems to be that a party would not be able to challenge constitutionality of the language of Senate Bill 308 itself or else challenge the action of the Department of Natural Resources solely on legal issues. And I think that action would still be open without the requirements of exhaustion of administrative remedies. CO-CHAIR PEARCE: Senator Salo. SENATOR SALO: Okay. I think -- well, I guess a further question is, though, as to whether -- as to who that appellant could be. I mean, does it have to be somebody -- I mean, the way the new bill, it couldn't be somebody who had not been involved earlier in the process. MS. EASON: Again, Madam Chair and Senator Salo, and Mary Lundquist, please jump in if I'm misstating, but my understanding is that that is the preferred course in the courts today. That you have to have some connection to the process. You have to have been a participant in the administrative process in order to have standing generally. And that the courts would tend to not favor allowing someone who had not demonstrated that standing. One of the things that we have found is that the courts have traditionally not applied that rule very carefully and very consistently in cases of oil and gas leasing. One of the reasons that this appeal process is proposed to be clarified is an incident that we had in Sale 57, a North Slope sale, where someone raised an issue, as I recall two to three years before the sale was held, it was actually, as I recall, a federal agency that expressed concerns about the effect of a sale on the gates of the Arctic National Preserve which was not far from that sale area. We completed the administrative process on that sale, did a final finding, which we presumed to have met the concerns of that federal agency since there was no further commenting by them nor any appeal, only to find afterwards, that a third party litigant who had not participated, who had not raised that issue, whom we had no idea was concerned about that issue, subsequently went to court without an appeal to the commissioner and raised it as an original action. And, really, this is the primary thrust of what we are trying to accomplish with this amendment is to -- actually a couple of things. One, to assure that everyone has an opportunity to raise any issue they want, but also to balance that by assuring that they do it in the proper context, within the administrative process, within the period allowed for comments so that the department can respond to an effective way to their concerns. And then if they're still aggrieved by a final decision to assure that they have an appeal right to the commissioner, and that they have plenty of time with the amendment to allow 90 days before the final decision, that if they're still concerned or believe that the final decision is unfair from the commissioner, they can then go to Superior Court. But then again, we're saying that if you go to Superior Court, you can't raise new issues there that you haven't raised before either the department before you went to the commissioner or before the commissioner, that you have to talk about only the issues that you've raised. And we believe that's a fair balancing for all the parties so that people have some predictability and some opportunity on our side to respond to concerns in a timely way. MS. LUNDQUIST: Madam Chairman? CO-CHAIR PEARCE: Yes, Mary. MS. LUNDQUIST: I would just like to add [indisc.] comments of Director Eason, that currently the courts have held that under the APA, there's no definition of who can raise an administrative appeal. The courts have held their party can bring an appeal, and a party is considered a person who is actually aggrieved by the decision of the agency and who participates in the proceedings for the purpose -- and is directly interested in the proceedings. And I think that the requirements of participation at the administrative level encourages public participation and it also enforces the purposes of the exhaustion of administrative remedy which is to allow the administrative agency to perform the functions that are within its special [indisc.]. And it allows them to develop a factual record [indisc.] expertise and correct its own errors so that judicial controversies are [indisc.]. CO-CHAIR PEARCE: Any other questions, Senator Salo? SENATOR SALO: No. I think ... CO-CHAIR PEARCE: Okay. Mr. Eason, on the phasing question, it's my understanding that the language we have in this bill closely conforms to, or mirrors inasmuch as Mr. Chenoweth ever mirrors anything, mirrors the federal coastal management regs; is that correct? MR. EASON: That is correct. CO-CHAIR PEARCE: On phasing? MR. EASON: That is correct, Senator ... MR. ROGERS: In Title 46. MR. EASON: For Title 46, which is, of course, where the federal interest lies with the Coastal Zone Management Act. For the members of the committee, you probably all have seen a letter from Mr. Clement Lucey [ph] of the Office of Coastal Resource Development, and Mr. Lucey was asked by, I believe Ricky Ott [ph] [tape ends mid-speech] ... End SFC-93 #67, Side 1 Begin SFC-93 #67, Side 2 MR. EASON: [Tape starts mid-speech] ... in a letter earlier about whether or not there was the risk that the state's program -- Coastal Zone Consistency Program may be decertification or some way affected negatively by the provisions of SB 308. And that letter asks for review of version (k) of SB 308 to determine that. And Mr. Lucey's letter didn't draw any firm conclusions. It never arrived at a conclusion that, in fact, if the bill, as drafted in version (k), were adopted that it would somehow lead to decertification, but he suggested that there were two areas that were different in his view, or could potentially be viewed as having different standards for federal projects and state projects if 308 was adopted as version (k). And the two things he noted were the use -- or limiting the effects you consider to significant direct effects. So in response to that letter, we deleted direct to address his concern. And he also said that he believed that there needed to be some guidance as to when phasing would be allowed. And so we went right to the federal regulations, and the federal regulations specifies, as I said earlier, that if you know enough about a proposed project and its pieces to issue one conclusive consistency determination so that the applicant never has to come back again for another, then you can't phase. But if you don't know enough, you do phase. And so we've adopted the same standard that exists right now in federal law. CO-CHAIR PEARCE: Okay. Mr. Chenoweth is back, but let's take a recess while we get Senator Rieger back to the table since the question about Amendment Number 9 was his question. [In Recess] CO-CHAIR PEARCE: [Tape starts mid-speech] ... we do have Mr. Chenoweth. Senator Frank, would you please make the motion on Amendment Number 9 again? Amendment Number 9? SENATOR FRANK: Madam Chair, I move that we adopt Amendment Number 9 and ask unanimous consent. CO-CHAIR PEARCE: And Number 9 is back before us. Senator Rieger had a question, Mr. Chenoweth. We couldn't figure out your deletion on page 8, line 8, because it's not in the bill, so we're trying to understand exactly what you're doing. MR. CHENOWETH: The amendment, Madam Chair, is to take the requirement of the department's responding to comments received, which now appears in the oil and gas -- in the subsection that's applicable only to oil and gas, and move it so that it becomes applicable in all instances, whether the [indisc.] finding applicable for oil and gas or for any other proposed disposal. The first insertion, page 6, line 16, does that. It takes and puts in as new language in the general law, applicable to all the proposed disposals, the requirement that there be a preliminary finding with a [indisc.] response and [indisc.--noise] final finding requirement for the department affirmatively respond to agency and public comments received. Now I thought that was -- putting it there would make it duplicative of materials that were already in a later portion of the bill. So what I'm proposing you do with page 7, line 29, is to remove the language as proposed to be amended from that point and then in order to get it out of the statute at that point altogether, page 8, line 8, brackets all of that language. And the only reason that there is a difference between page 7, line 29, and the later showing -- and having that language show up later on page 8, line 8, is that there's intervening new underlined language, and any deletion is typically -- any bracketed language typically follows underlined [indisc.]. It's just a matter of placing it in the proper order. CO-CHAIR PEARCE: So, Senator Rieger, if you turn to page -- of the bill, if you turn back to page 7, lines 29 through 31, there's the language he's actually removing. It's just to get a [indisc.] new stuff in between. SENATOR RIEGER: [Indisc.]. CO-CHAIR PEARCE: Well, maybe not. That's where subsection is. SENATOR RIEGER: Okay. Madam Chair? CO-CHAIR PEARCE: Senator Rieger. SENATOR RIEGER: I think I see that we need to add the bracketed language as Mr. Chenoweth suggests. I still don't understand why that bracketed language doesn't occur on page 7, line 29, instead of what was there before because the next phrase, the phrase that follows paragraph 2 will be underlined material in a preliminary written finding, facts -- and I'm reading from the top of page 8, facts that are known to the director at the time of preparations of finding [indisc.] that are, and then (a) and (b) will follow. And then following that last underlined word, subsection on line 8, it'll immediately be followed by the bracketed words, a summary of agency and public comments received and the department's responses to those comments. In other words, the bracketing is brought down behind the underlined material. Now I understand. CO-CHAIR PEARCE: Good. You can explain that. SENATOR RIEGER: No. I'm not going to explain it [indisc.]. Okay. Good enough. On 6(b), the very first one, that word [indisc.] is probably redundant, Jack. MR. CHENOWETH: That's correct. SENATOR RIEGER: Okay. Okay. I don't have an objection to Number 9. CO-CHAIR PEARCE: Okay. Any other questions about Amendment Number 9? Any objections to Amendment Number 9? Okay. Number 9 has been adopted. Are there any other amendments to be offered today on Senate Bill 308, which will now become a Finance CS 308? Will of the committee on Senate Bill 308? SENATOR FRANK: Madam Chair? CO-CHAIR PEARCE: Senator Frank. SENATOR FRANK: I move that we pass out the CS for Senate Bill 308 with individual recommendations. UNIDENTIFIED SPEAKER: Objection. CO-CHAIR PEARCE: The motion to move Senate Bill 308. There is an objection. All of those favor of moving the bill, please signify by raising your right hand. Anyone opposed? Okay, on a one, two, three, four, five to one vote, Senate Bill 308 moves. Mr. Eason, we will need a new fiscal note. I don't think it's changed dramatically, but [indisc.] updated fiscal note from the department, please. [End of requested portion] CSSB 308(RES) was REPORTED OUT of committee with a "do pass," and zero fiscal notes for the Department of Fish & Game, Office of the Governor, and Department of Environmental Conservation, and a fiscal note for the Department of Natural Resources for $34.2. Co-chairs Pearce and Frank, Senators Kelly and Sharp signed "do pass." Senator Kerttula signed "no recommendation." Senator Rieger signed "do not pass." (The minutes from this point on are not verbatim.) CS FOR SENATE BILL NO. 370(JUD): An Act providing an exemption from gambling laws for gambling conducted by cruise ships for their ticketed passengers in the offshore water of the state outside of ports; requiring certain disclosures in connection with promotions on board cruise ships and making violation of that provision an unfair trade practice; defining `cruise ship'; and providing for exemption fees for certain cruise ships before they can conduct gambling in the offshore water of the state. Co-chair Pearce announced that SB 370 would be heard in committee strictly as an overview. She invited Tom Dow, Vice President of Hotels, Princess Cruises, to join the members at the table. She also said Donald Stolworthy, Director, Charitable Gaming Division, Department of Revenue, was in the audience and available for questions from the committee. Co-chair Pearce asked Senator Sharp if he would like to make a statement regarding the bill since it was introduced by the Transportation Committee. Senator Sharp said there was a short sponsor statement but he would give the floor to Mr. Dow in consideration of limited time in the meeting this morning. TOM DOW said that SB 370 would provide for an exemption for the state's gambling laws for cruise ships and in effect would allow cruise ships to operate casinos on board when sailing within Alaskan waters with the exception of three miles off any port of call. This bill would restore rights to cruise ship operators which have been common practice within the industry for about 20 years. He said a letter in support of SB 370 had been sent to Senator Taylor and would be presented to the committee if it was not on file. The bill would require a fee for the exemption. An estimate said that this bill would raise approximately $300,000 per year from cruise ship companies. He felt that revenues would grow in consideration of new ship construction plans. Mr. Dow went on to say that in the last 20 years Alaska had become one of the premier cruising destinations in the world, currently ranking number 2. During this period of growth and development, there was no evidence that the on- board entertainment activities had any impact on any Alaskan resident or community because of the way casinos operated. The casinos were open only when the ship was underway and closed when in port. Access was limited to passengers who had paid for a trip. He felt the public policy concerns related to gambling would not be compromised. He knew Alaskans appreciated the importance of tourism to the state, they recognized the significant role that cruise ship companies played, and Alaskans did not favor prohibiting casinos. He pointed out that all world class cruises offered gambling and passengers now expected it. He felt there was no public policy opposing gambling on cruise ships and the state could gain some revenues from those ships that wished to continue gambling on its cruises. He said that this bill effected a small portion of time when the ships were in Alaskan waters. In answer to Co-chair Pearce, Mr. Dow said that the time the casinos were open varied depending upon the ship. For Princess cruises, normal operating time would be from about 10 am to 2 am in the morning excepting when in port or during a special glacier viewing or other sightseeing opportunity when the casino would be closed. In answer to Senator Rieger, Mr. Dow said that passenger participation depended on the cruise company, space available and demographics. He estimated 50-60 percent of Princess cruise ship passengers participated at some point to some extent. In answer to Co-chair Pearce, Mr. Dow said that Princess ran its own gambling casino. In answer to Senator Kelly, Mr. Dow said that a preliminary plan for one of his ships said that casinos would operate the first two days, the evening the first day and the second day from 9am to 2am, the third would be closed after 2am. The next two days would be closed entirely, day five would be open from 9:30am to 2am, and day six, 2pm to 2am. He said there was some ability to adjust the time schedule depending on the situation but no one had ever measured the increment of activity that would be prohibited so it was hard to estimate use. In answer to Senator Sharp, Mr. Dow said that it took about two days to reach Alaska waters from Vancouver. In answer to Senator Kerttula, fees were not paid to other states since Alaska was unique in that the cruise ship hugged the coast for a substantial part of the cruise. Out of Los Angeles or Miami, by the time passengers were settled, the ship was out three miles and gambling was not an issue. He said that there was one similar situation in Chesapeake Bay in Maryland and exempted ships from gambling so they could call in Baltimore. (In a later meeting, Mr. Dow said that Maryland charged the cruise ships a $25 fee.) Senator Sharp noted that item 2 on lines 1 and 2, and Section 3 and 4 on page 2 which required that any promotion done on board a ship had to state clearly that it was a paid advertisement had been added to CSSB 370(JUD). This had been requested by vendors up and down the coast. In answer to Senator Kerttula regarding enforcement costs, Senator Sharp said that in Judiciary Committee the word exemption was changed from the word licensing thus reducing the fiscal notes. It was also noted that the new fiscal note for the Department of Revenue was for $43.6. Co-chair Pearce announced that SB 370 would be HELD in committee. CS FOR HOUSE BILL NO. 199(O&G) am: An Act relating to the exploration and production of oil and gas and related hydrocarbons, to oil and gas exploration licenses, and to oil and gas leases in certain areas of the state; and providing for an effective date. Co-chair Pearce announced that HB 199 was before the committee. She invited Jim Eason, Director, Division of Oil and Gas, Department of Natural Resources, and Ken Boyd, Deputy Director, Division of Oil & Gas, Department of Natural Resources, to join the members at the table. Senator Kerttula MOVED amendment 1. Co-chair Pearce OBJECTED for discussion purposes. Senator Kerttula WITHDREW amendment 1 because it contained a drafting error. Senator Kerttula MOVED amendment 2. Co-chair Pearce OBJECTED for discussion purposes and asked Ken Boyd to comment. KEN BOYD said that amendment 2 was a policy call of the legislature. As a practical matter, the Commissioner was hired by the Governor, and, potential lease/sale programs were reviewed in discussions and cabinet meetings. He felt that amendment 2 would slow the process but again reiterated it was a legislative policy call. Senator Kerttula felt that important things could occur without enough input from the Governor. Discussion was had by Senators Kelly, Sharp, Kerttula, and Rieger regarding the implication of amendment 2. Senator Salo commented that the intent would be that the Governor would be another approval rather than another person to lobby. Mr. Boyd reminded the committee that the entire best interest finding and public process was a part of the legislation and believed a large part of the public process would have taken place before this point. Senator Kelly felt that there would be more exploration licensing without the amendment. Co-chair Frank said that SB 310 had a provision asking for the Attorney General for sign-off. He suggested that the Attorney General could give a second look at approval. Mr. Boyd was opposed to adding another formalized step in the process. After more discussion with Co-chair Frank, Mr. Boyd reiterated his position. End SFC-93 #67, Side 2 Begin SFC-93 #69, Side 1 Co-chair Kerttula MOVED a conceptual amendment to amendment 2 as suggested by Co-chair Frank by changing the words "approved by the governor" to "review by Attorney General in writing 30 days of time received". Senator Rieger OBJECTED saying he felt it was not a matter of legal discretion but was more a policy call. Discussion followed by Senator Kerttula and Co-chair Pearce regarding exploration decisions. Co-chair Pearce called for a show of hands and the motion amending amendment 2 FAILED. Senator Kerttula WITHDREW amendment 2. Senator Sharp MOVED amendment 3. Senator Kelly OBJECTED. Senator Sharp felt that a 20,000 acre threshold was too severe, that being twice the size of the largest state lease currently available for exploration and four times the standard federal lease size. He went on to list reasons to reduce the size to 10,000 acres. Mr. Boyd understood the concern of Senator Sharp that the "little guy" would be able to play and felt that had been addressed throughout HB 199. He also felt that 10,000 acres in a remote acre was not reasonable. Even though he had no objection, he pointed out 10,000 acres would be quite limiting for this program. Senator Sharp noted that the source of fuel for Barrow was on an even smaller piece of land. Mr. Boyd said that in the beginning a much larger area must have been explored before the area under development was confined to that small of an area which was characteristic of most developments. At this time Co-chair Pearce asked the committee to adopt the new version before them. Senator Sharp MOVED for adoption of SCSCSHB 199(FIN) version "Q". Hearing no objection, it was ADOPTED. Senator Sharp again MOVED amendment 3. Hearing no further objection, it was ADOPTED for incorporation within the Finance Committee Substitute for the bill. Senator Kerttula MOVED amendment 4. Co-chair Pearce asked for clarification of amendment 4. Mr. Boyd said that the 5 percent statute, other than the royalty provisions, was added to the laws in 1959. In 1964, it was repeated but renumbered. In 1967, the provision on page 9, line 12 beginning "In unproven areas..." was added to law and that became the basis for the discovery loyalty provisions which were used for awhile but later removed from law. Mr. Boyd said he had no objection to deleting that section. Co-chair Frank asked Mr. Boyd to restate that he did not object to amendment 4. JIM EASON said he did not recall the exact time of the repeal, but for a number of years, discovery royalty provisions were in the statutes and a number of wells did qualify for discovery royalty. The most recent incident of a qualifying discovery royalty lease was the discovery well for Point McIntyre. It was an old lease, had the discovery royalty provision, and allowed a reduction in royalty to 5 percent for the first ten years beginning at the time of the certification of eligibility. In most cases, the discovery royalty period was considerable less than 10 years. In answer to Co-chair Pearce, Mr. Eason said this new law would have no effect on existing leases. In answer to Co- chair Frank, Mr. Eason confirmed that the department did not oppose amendment 4 and viewed it as a policy call. No further objection being heard, amendment 4 was ADOPTED. Senator Kelly MOVED amendment 5 which deleted the words "in an amount determined by the commissioner, not to exceed" and insertion of the word "of" on page 4, line 23 and 24. Mr. Boyd felt there would be no objection to amendment 5. Hearing no objection, amendment 5 was ADOPTED. In answer to Co-chair Frank, Mr. Boyd said the geology and proposed work commitment would determine the size of acreage granted to prospective licensee. In answer to Co-chair Frank, Mr. Boyd felt that science determined and preferred not to limit artificially the input and consideration that the Commissioner and Division might have in reaching its decision regarding acreage. Senator Rieger MOVED amendment 6. Co-chair Pearce OBJECTED for discussion purposes. Senator Rieger spoke to the amendment. No further objection being heard, amendment 6 was ADOPTED. Senator Rieger asked for an explanation of language on page 5, lines 24 through 26. Mr. Boyd said that if less than 25 percent of the work commitment was done, the license was lost. If more than 50 percent of work commitment was done by the fourth year, there was no relinquishment of land. If between 26 and 49 percent of the work was completed, 25 percent of the acreage, but no more than 50 percent, would be relinquished. He agreed that if no work had been done by the fourth year, the license would be relinquished. If the company did not outline what property it wanted to relinquish, the Commissioner would decide. He pointed out that if the work was not done, a lease could not be issued. He also said that if work ceased, the bond would be continually increased. Senator Sharp pointed out that the company could lose everything if the work was not done by the tenth year. Senator Kerttula read from a statement by Donald Harris, "the major oil companies decide the direction of this legislation. (Senator Kerttula commented that Mr. Harris was worried Alaska was treating its oil and gas like Mexico did and it could become a concession causing much conflict.) HB 199 effectively created the ability for the state to allow concessions regarding oil and gas leasing. The history of concessions is the monetary rape of the state and its resources and lands. This has been overcome in the past. Most instances has been after the passage of considerable time and blood shed. Initial awarding of concessions should be done by competition, that is, through competitive bids under HB 199. The actual production phase, the original exploration tract granted, can be rolled into a lease with as little as 5 percent royalty. In HB 199, this is done at the Commissioner's discretion and frankly gives too much discretionary authority for the values involved. There are 10 hydro provinces with the possible of 2 million acres for exploration, production, concessions. Under this bill, tracts range from 20,000 acres (and now it's 10,000) to 500,000, thus a few major oil companies could take up all the valuable leases on state lands and waters and hold up all state production including that in existing leases citing economic concerns as the reason. Competition, to be fair, should come into play at the time of leasing, not later on. The rollover provision in HB 199 is especially harmful because it effectively creates a concession. This year, the summer of 1994, the state can know the boundaries of all carbon and hydro-carbon deposits. This information, in turn, could be marketed by the state in competitive leasing basis. Knowing the boundaries of carbon and hydro- carbon provinces creates large cost efficiencies for the major oil producers because they don't have to pay to conduct magnetic gravity seismic tests outside the province boundaries. Knowing the boundaries could also eliminate the disturbance on land and waters unnecessarily. HB 199 is a dangerous piece of legislation because it creates the potential for the greatest giveaway on public resource in state history." Senator Kerttula said this statement was given to him without his solicitation. Co-chair Pearce remarked, that in the world scheme, in the frontier areas (she included Alaska here), the leasing or the licensing for oil and gas exploration was done by exploration licenses. Perhaps Alaska was the only one that did not use exploration licensing. All of those countries and every country in North and South America, with the exception of the United State and Canada, have oil and gas reserves owned by the state or federal government. In every one of those frontiers, exploration licensing was used very successfully. She felt that Alaska would have to offer this exploration license. Senator Kerttula said Alaska did not have to compete with any warlike activities found in other countries. Co-chair Pearce said that Britain had a very stable country and exploration licenses was working in the world. Senator Rieger MOVED for passage of SCSCSHB 199(FIN) as amended from committee with individual recommendations. No objection being heard, it was REPORTED OUT of committee with "individual recommendations," and a zero fiscal note for the Department of Natural Resources. Co-chair Pearce and Senators Rieger and Kelly signed "do pass." Co-chair Frank and Senator Sharp signed "no recommendation." Senator Kerttula signed "do not pass." BILLS SCHEDULED BUT NOT HEARD: CS FOR SENATE BILL NO. 67(FIN): An Act amending provisions of ch. 66, SLA 1991, that relate to reconstitution of the corpus of the mental health trust and to the manner of enforcement of the obligation to compensate the trust; and providing for an effective date. ADJOURNMENT The meeting was adjourned at approximately 11:08 a.m.