MINUTES SENATE FINANCE COMMITTEE April 23, 1999 8:07 A.M. TAPES SFC-99 #108, Side A & B SFC-99 #109, Side A & B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 8:07 A.M. PRESENT Co-Chair John Torgerson, Senator Randy Phillips, Senator Dave Donley, Senator Loren Leman, Senator Gary Wilken, Senator Al Adams, and Senator Pete Kelly. Also Attending: SENATOR ROBIN TAYLOR; MEL KROGSENG, Staff, Senator Robin Taylor; PAT CARTER, Staff, Senator Drue Pearce; SENATOR DRUE PEARCE; MARY JACKSON, Staff, Senator John Torgerson; LAMAR COTTON, Deputy Commissioner, Department of Community and Regional Affairs; ERIC YOULD, Executive Director, Alaska Rural Electric Association (ARECA), Anchorage; BRETT HUBER, Staff, Senator Rick Halford; DICK BISHOP, Vice-President, Alaska Outdoor Council (AOC), Juneau; GERON BRUCE, Legislative Liaison, Office of the Commissioner, Department of Fish and Game. Teleconferenced: DICK MYLIUS, Resource Assessment & Development, Division of Lands, Department of Natural Resources, Anchorage; JUDY BRADY, Executive Director, Alaska Oil and Gas Commission, Anchorage; CHARLES WALLS, President & CEO, Alaska Village Electric Coop (AVEC), Anchorage; BRUCE KOVARIK, Executive Director, Association of Alaska Housing Authority (AAHA), Anchorage; DICK ENERMAN, Planner, Division of Energy, Anchorage; BRAD REEVE, General Manager, Kotzebue Electric Association (KEA), Kotzebue; WALTER SAMPSON, NANA Corporation, Kotzebue; MIKE SALLEE, Commercial Fisherman, Ketchikan; LANCE NELSON, Assistance Attorney General, Natural Resources Section, Civil Division, Department of Law, Anchorage. SUMMARY INFORMATION SB 7-INCREASE LAND GRANT TO UNIV. OF ALASKA CSSB 7(FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Natural Resources dated 3/5/99, the University of Alaska dated 1/22/99 and the Department of Fish and Game dated 1/29/99. SB 68-COOPERATION WITH FEDERAL AGENCIES SB 68 was HEARD and HELD in Committee for further consideration. SB 134-OIL & GAS CONS. COMN./CONSERV. TAX CSSB 134(FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 4/14/99 and the Department of Administration dated 4/12/99. SB 157-POWER COST EQUALIZATION SB 157 was HEARD and HELD in Committee for further consideration. Co-Chair Torgerson called the Senate Finance Committee meeting to order at approximately 8:08 A.M. SENATE BILL NO. 7 "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." CS FOR SENATE BILL NO. 7(RES) "An Act relating to the University of Alaska and university land, and authorizing the University of Alaska to select additional state land." Senator Robin Taylor spoke to work draft version #1- LS0072\K, Luckhaupt, 3/24/99. [Copy on File]. He explained the changes between that version and the one previously adopted in the Resources Committee. Senator Taylor advised that the proposed version would be clearer and easier for everyone to follow. MEL KROGSENG, Staff, Senator Robin Taylor, commented that Legal Counsel, Jerry Luckhaupt, had recommended the above mentioned changes. Senator Leman MOVED to adopt the "K" version as the working document before the Committee. There being NO OBJECTION, it was adopted. Co-Chair Torgerson advised that Amendments #1 and #2 had been incorporated into the new committee substitute. [Copies on File]. Following discussion between Senator Donley and Co-Chair Torgerson, it was decided that only the bottom portion of Amendment #3 would be offered. [Copy on File]. That language would insert: "Must be managed in a manner that permits the continuation of subsistence, sport hunting and sport fishing" to the maximum extent possible. Senator Donley MOVED to adopt that language. Senator Taylor explained the language had not been inserted because by listing specific activities, then others are then precluded. He recommended that rather than listing every conceivable match, it was the intent to remove specific designations and merely use; "Continuation of traditional uses of the land", leaving the category broader. He reiterated that the language had been intentionally left generic. Senator Donley agreed with Senator Taylor and suggested that the concern could be addressed by adding the language: "Including, but not limited to". Senator Donley MOVED to WITHDRAW Amendment #3. There being NO OBJECTION, Amendment #3 was withdrawn. Senator Adams MOVED to adopt Amendment #4, 1-LS0072\I.2, Luckhaupt, 3/3/99. [Copy on File]. He stated that there are statewide municipalities which have not completely selected their lands. Senator Taylor countered that there are municipalities around the State, which over the years have been precluded from making certain selections either by the Mental Health Trust Fund litigation or other factors. He recognized that it is a problem. He added that he was willing to work on a viable solution to address the concern. Senator Taylor pointed out that Line #8 of the amendment, stipulates that the "guts" of the bill would only take effect if each municipality of the State was in existence on the effective date of that section. He recommended that a percentage number be added in order to make the selection process. He reiterated that he was willing to work on that concern, however, he felt that the proposed language "went too far". Senator Adams MOVED to WITHDRAW Amendment #4. There being NO OBJECTION, Amendment #4 was withdrawn. Senator Adams MOVED to adopt Amendment #5. [Copy on File]. Co-Chair Torgerson OBJECTED for the purpose of discussion. Senator Adams stated that the amendment would clarify that if the University did not reimburse the Department for reasonable costs incurred in the selection, platting and surveying of the land, the Department could not convey the land to the University of Alaska. Senator Taylor commented that the situation should be worked out between the University and the Department of Natural Resources. Senator Adams argued that the land would not be available if that portion of the Department of Natural Resources budget was not addressed for the current year budget. He stressed the concerns of adequately funding the Lands Division in FY00. A roll call vote was taken on the motion. IN FAVOR: Adams, Phillips, Donley OPPOSED: Leman, Wilken, P. Kelly, Torgerson Senator Green and Senator Parnel were not present for the vote. The MOTION FAILED (3-4). DICK MYLIUS, Resource Assessment & Development, Division of Lands, Department of Natural Resources, Anchorage, (Testified via Teleconference) offered to answer questions of the Committee. He pointed out that the Department had previously testified in opposition to SB 7. Mr. Mylius testified the Department's concerns are that the process for identifying the 250,000 acres would be time consuming, expensive and a contentious process. He pointed out that the Department had difficulty in identifying land to constitute the Mental Health Trust and that there was much public opposition. The Department estimates that it would cost over $1 million dollars per year to survey and transfer that land. He reiterated that the Senate Finance Committee in this year's proposed budget had basically "gutted" the Division of Lands, the agency responsible to take the lead in providing this transfer. Senator Phillips interjected that he "took exception" to this testimony. Co-Chair Torgerson requested that Mr. Mylius restrict his testimony to the bill and not the budgetary actions. Mr. Mylius continued, the Department has concerned regarding the impact the proposed bill would have on the municipalities because over 600,000 acres are currently owed to the municipalities. The same lands that the University wants are the ones which municipalities also request. Mr. Mylius concluded that this bill would create an uncertainty regarding land ownership in the State of Alaska. Senator Phillips questioned if zero dollars had been given to the Division of Lands. Mr. Mylius replied that cuts to the Division of Lands were approximately at 17%. Senator Leman MOVED to report CSSB 7(FIN) out of Committee with individual recommendation and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSSB 7(FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Natural Resources dated 3/5/99, the University of Alaska dated 1/22/99 and the Department of Fish and Game dated 1/29/99. SENATE BILL NO. 134 "An Act authorizing the Alaska Oil and Gas Conservation Commission to determine the amount of and to collect a charge for operating wells subject to the commission's jurisdiction, and to allocate expenses of investigation and hearing, and repealing the oil and gas conservation tax; and providing for an effective date." CS FOR SENATE BILL NO. 134(RES) "An Act authorizing the Alaska Oil and Gas Conservation Commission to determine the amount of and to collect a charge for operating wells subject to the commission's jurisdiction, and to allocate expenses of investigation and hearing; repealing the oil and gas conservation tax; and providing for an effective date." PAT CARTER, Staff, Senator Drue Pearce, explained that the Alaska Oil and Gas Conservation (AOGCG) had been created to protect the public interest through enforcement of the Alaska Oil and Gas Conservation Act. The goal of the Commission is to ensure that no hydrocarbons are wasted and that operations are conducted in a manner that provides maximum recovery of the resources. SB 134 repeals the existing Oil and Gas Conservation Tax and institutes a stable funding source to assure that the Commission is capable of carrying out their objectives. Mr. Carter continued, the original intent of the legislation was to have the oil and gas industry pay for the function of the Commission through the Oil and Gas Conservation Tax. While this system may have been adequate in the past, it no longer is sufficient to cover the costs associated with the operation of that Commission. The conservation tax is directly proportional to production with a four mils per barrel fee rate. The work of the Commission, however, is not proportional to the production of oil and gas. Production is declining but the work of the Commission is not. Mr. Carter pointed out that SB 134 would create a program receipt system in which the regulatory cost charge is directly associated with the total volume of fluids produced or injected. This type of system more accurately reflects with the factors directly associated with the workload of the Commission. He advised that the Commission had experienced budget difficulties in the past, even when the tax proceeds exceeded annual appropriations. He testified that AOGCC is currently encountering budget difficulties that are directly related to the decline in oil production. SB 134 would create a stable funding source that will enable the AOGCC to provide the monitoring services necessary to protect the future of Alaskan interests. Senator Adams inquired if the oil industry supported the bill. Mr. Carter responded that the oil industry had not yet spoken with Senator Pearce's office. Senator Adams requested clarification of changes made in the Senate Resources Committee. Mr. Carter stated that changes had been made to the cost allocations. He added that there had been concerns regarding the past unitization agreements, which are unforeseen costs that occur throughout the budgetary year. Co-Chair Torgerson questioned if any municipal government would be exempted through Section #5. Mr. Carter did not know of any exemptions other than those directly related to SB 134. Co-Chair Torgerson referenced Page #1, Lines 11-12, which refers to regulatory charges, paid by the permittee. He questioned the inclusion of that language: "The ability to pay". Mr. Carter commented that he did not know why that language had been included, which had been brought forward from the AOGCC document. Co-Chair Torgerson asked if the sponsor would object to removing that language. Mr. Carter replied that there would be no objection. Senator Donley MOVED a conceptual Amendment #1, to delete the above mentioned language on Page #1, Line 12, "ability to pay". Mr. Carter noted that there was a committee substitute available containing the technical corrections made by the legal department at AOGCC, the "Z" version of the proposed legislation. Co-Chair Torgerson requested that version be copied for Committee members. Senator Donley MOVED to WITHDRAW Amendment #1. There being NO OBJECTION, Amendment #1 was withdrawn. JUDY BRADY, Executive Director, Alaska Oil and Gas Commission, Anchorage, (Testified via Teleconference), stated that the Commission has reviewed SB 134 and that comments and concerns were voiced. She emphasized that the Commission does not support SB 134 because they believe that the bill would weaken oversight and control over State taxation and spending. She added that it is critical that AOGCC maintains its ability to issue permits and decisions that are required for on-going oil field operations. To that end, AOGCC recommends that they remain appropriately funded so to be a fully functional and independent entity. Ms. Brady informed members that there are concerns with the funding source and the funding mechanism embodied in SB 134. All these concerns were conveyed to both the Administration and the Legislature. Ms. Brady continued, AOGCC members have concerns with moving funding from AOGCC general fund appropriation to a non- general fund category since it would lessen legislative oversight of the Commission's budget. This legislation would create a virtually unfunded taxing mechanism. It is the combination of how the tax would be established to a regulatory process plus moving to the non-general fund combination which will be of great concern to the Commission. She noting that AOGCC was willing and committed to work with the Legislature during the interim to develop an appropriate and accountable way to fund AOGCC in the future. Senator Phillips viewed the above testimony as inconsistent with previous recommendations of that Commission. Ms. Brady replied that there has been a struggle in the State in how to address non-general funds. She emphasized that moving a budget would require a different accounting system. The concern for AOGCC is how the bill proposes to tax so that the regulatory group can establish the taxes. She pointed out that AOGCC already pays tax and regulation fees. The Legislature did not always appropriate the money as it was competing with other needs. The amount of funds that were paid to that tax now has declined as the needs have risen. SENATOR PEARCE explained the change in the funding mechanism. She noted that there were no complaints from the industry when that was added; they did not want to pay for other utilities. The mechanism does charge a portion of the fees to re-inject the liquids, which definitely differs from other oil producing states. She indicated that the re- injection process is a portion of the AOGCC's responsibility. Mr. Carter explained the changes made to the Senate Resources version of the legislation. TAPE SFC-99 #108 Side B Senator Leman pointed out that language on Page 2, Lines 15- 22, was very confusing. Mr. Carter replied that the total volume of liquid would be approximately 3.3 billion. He further explained the mathematical procedure involved in determining that number. Senator Leman recognized that it was intended to be the volumetric procedure of the volume and he recommended that language be rewritten. Senator Pearce agreed that section needed further work. Senator Leman voiced concerns for future litigation with the current proposed language. Senator Donley MOVED to adopt work draft version 1-LS0259\V, Chenoweth, 4/20/99, as the version before the Committee. There being NO OBJECTION, it was adopted. Senator Donley MOVED a change to Page 1, Lines 11 and 12, delete "ability to pay". There being NO OBJECTION, the change was made to Amendment #1. Senator Phillips requested that the Department of Revenue address the proposed fiscal note. Co-Chair Torgerson asked if Senator Pearce understood the positions for requesting funds listed in the fiscal note. Senator Pearce stated that she did not endorse the use of designated receipts. She emphasized that the bill before the Committee does not address the supplemental request currently being made. Senator Pearce added that SB 133 and SB 134 had been introduced together and that SB 133 would add new funding to AOGCC. She stated that the bill before the Committee would staff AOGCC as they currently are. Senator Phillips voiced his concern regarding the proposed funding for computer enhancement. Senator Pearce explained that AOGCC currently resides in an unsafe office in Anchorage. The employees are concerned about the darkness that surrounds the building because it is located in an unsafe neighborhood. If SB 133 passes, the office will be moving to a different facility. If SB 133 does not pass, that fiscal note will "fall out" as will the moving costs associated with the above-mentioned concerns. Co-Chair Torgerson asked if the capital costs would be added into the regulatory costs. Senator Pearce believed they would. Senator Wilken MOVED to adopt the amended CSSB 134 (FIN). Senator Adams OBJECTED. Senator Adams noted that he would not vote for any tax unless he was presented with a long-range plan. Co-Chair Torgerson pointed out that the bill would repeal the tax. Senator Adams stated that was not his interpretation of the way the bill was written. Co-Chair Torgerson pointed out the repealler section, AS 43.57 & 10(a) are the tax. Senator Adams WITHDREW his OBJECTION. There being NO further OBJECTION, it was so ordered and the bill was moved from Committee. CSSB 134(FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 4/14/99 and the Department of Administration dated 4/12/99. SENATE BILL NO. 157 "An Act relating to power cost equalization; and providing for an effective date." MARY JACKSON, Staff, Senator John Torgerson, reviewed the bill. She noted that the working group who addressed concerns of this bill included Senator P. Kelly and Senator Adams. Ms. Jackson spoke to the importance of the Power Cost Equalization (PCE) program to areas of Alaska that are reliant upon diesel generated power. It is recognized and that the bill is intended to extend the life of the program by restructuring some of its components. The bill would: * Reduce the current 700 kWh to 350 kWh per month. * Expand the method of establishing the base rate by including Kenai and Palmer in the weighted average retail residential rate which currently only included Anchorage, Fairbanks and Juneau. ? Restructure the program so that the equalization rate applies only to residential customers, as opposed to the current residential and commercial structure. ? Add new language to the program to ensure that the rate charged by a PCE utility is not lower than a rate charged by a non-PCE utility, so to ensure that a customer who does not receive PCE pays a higher rate than a customer who does receive a PCE. Ms. Jackson provided a sectional analysis of the bill. Section 1 adds Kenai and Palmer into the statewide average, which would expand the base of the statewide average. Section 2 decreases the kilowatt-hours from 700 to 350 for consumptive use. Section 3 adds Kenai and Palmer into the statewide average as does Section 1. Section 4 decreases the kWh from 700 to 350 kWh and restricts it to residential use. Sections 5 & 6 are housekeeping references to the new sub Section (j). Section 7 establishes the effective date of the legislation. Ms. Jackson referenced the April 22, 1999, Power Cost Equalization (PCE) spread sheet contained in members packets. The sheet provides the most recent findings of the working group. [Copy on File]. Co-Chair Torgerson pointed out that the State has been funding the current rate, however, the hoped for is 85% funding. Senator Adams stated that the last supplemental decreased that number to 78%. Co-Chair Torgerson asked if the working group had any recommendations which the full Committee should consider. [Copy on File]. Ms. Jackson replied that the analysis of that group was currently before the Committee. She suggested that it could be approached either from the floor (9.9 to 10.9 cents/kWh) or raising the ceiling. The working group approached the situation from both places and the premise was to have less of an impact on the small Bush Communities. Senator Kelly referenced the handout. He explained how the floor was established including the calculations for Pelican and Skagway. The group is waiting to determine the actual cost to the residential consumer. The formula used to increase the floor and the impact of combining the ceiling from dropping down would establish the impact on the actual consumer. He advised that new spreadsheets would be forthcoming in the following week. Senator Phillips asked the average residential use per month in Alaska. ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association (ARECA), Anchorage, replied that the average in rural Alaska was 326 kWh. The average kWh usage in the Railbelt area is 688 kWh. He accessed that rural Alaska is roughly half of the other areas. Senator Phillips asked the basic differences between the rural area and the Railbelt regarding use of electricity. Mr. Yould pointed out that the Blue Ribbon Commission gathered profiles as to what the 326 kWh hours would accomplish. It is very different from urban areas versus rural Alaska, especially the refrigeration needs are higher. Senator Wilken requested further clarification of the spreadsheet. Senator P. Kelly pointed out that the spreadsheet was not accurate. Mr. Yould suggested that it would be beneficial to go to the 500 kWh; the 326 kWh is a monthly average and during the winter months, the usage increases. He stated that there are individual opportunities throughout the State and that some of the other systems being investigated are very costly. The State does have the resources; however, the problem is an economy of scale. He added that diesel generation exists but that there is no natural gas in rural Alaska. Mr. Yould noted that the State is looking for alternatives but that they are generally capital intensive. Senator Wilken inquired about diesel efficiency and working in conjunction with the University. Mr. Yould replied that ARECA was not working with the University at this time. He understood that the University was working with Department of Education with a $2.6 million dollar grant to develop a fuel cell using diesel power. Senator Wilken asked if the bill would exclude schools from PCE participation in the rural areas. Ms. Jackson acknowledged that it would exclude schools. She noted that Senator Torgerson had sent a letter to the Department of Education regarding this concern. Senator Wilken asked if Mr. Yould was aware of work being done on fuel cells. Mr. Yould acknowledged that he was aware of the work which in Anchorage was being funded by Chugiach Electric. He explained that the problem with fuel cells is that they are all natural gas and that it is difficult to distribute natural gas in rural Alaska. CHARLES WALLS, President & CEO, Alaska Village Electric Coop (AVEC), Anchorage, (Testified via Teleconference), pointed out that the statistics being referenced were three years old. He requested that the cap cut be reconsidered. Mr. Walls recommended that the Committee carefully scrutinize Section 7, the new section being added. That section could result in a village utility in not receiving the Power Cost Equalization (PCE) which would establish a new floor for all others. At the present time, the average revenue per kilowatt-hour for a non-PCE utility is regulated by the Alaska Public Utility Commission (APUC). He urged that the bill be reconsidered. Co-Chair Torgerson asked Mr. Walls to verify that used in the bill were dated from 1996. Mr. Walls replied that the handout referred to was the last published statistics available and was complied in 1996. Co-Chair Torgerson requested that Mr. Walls fax pertinent information to the Committee dealing with the proposed bill. BRUCE KOVARIK, Executive Director, Association of Alaska Housing Authority (AAHA), Anchorage, (Testified via Teleconference), testified that the Association supports the PCE program for residential and community customers. The State's regional housing authority has developed and operated home ownership of housing programs for over 7,000 families. He emphasized that the worse case scenario would be the loss of that program. TAPE SFC-99 #109 Side A Mr. Kovarik continued his testimony. Co-Chair John Torgerson commented that it would take time to consolidate the State's commitment and that of AAHA. Mr. Kovarik noted that a certain amount of funding could be taken from the Native Self-Determination Act and placed into a PCE fund. That fund would be invested and the interest generated from the fund would go to PCE. Co-Chair John Torgerson questioned how to get all parties to agree. Mr. Kovarik reiterated that the participation in the plan would have to be voluntary and flexible. The Housing Authority has investment strategies and cash flow considerations based upon work to be developed. It would need to be a plan which allows for the investment of funds. There are federal requirements and regulations. The hope is for assistance from the Department of Community and Regional Affairs. Co-Chair John Torgerson stressed his intention to move the bill through the Legislature this session. He commented that if the Housing Authority was to be used as a potential funding source, it is important to finalize that commitment. He was not sure about the possibility of using Alaska Industrial Development Export Authority (AIDEA) funds. Senator Randy Phillips questioned if there had been consideration by the Office of the Governor to use AIDEA funding. Mr. Kovarik replied that the only comments he had heard were at press conference regarding the consolidation of the Department of Commerce and Economic Development and the Department of Community and Regional Affairs. DICK ENERMAN, Planner, Division of Energy, Anchorage, (Testified via Teleconference) offered to answer any technical questions of the Committee. Senator Pete Kelly noted that Mr. Enerman would be preparing a spreadsheet for the Committee's review for the following week and recommended any suggestions be given to him. Mr. Enerman detailed the information he had been requested to present on the spreadsheet. The spreadsheet would indicate for each of the PCE utilities, an impact of various changes to the PCE would affect the financial impact. Co-Chair John Torgerson asked if the average use by month would be included. Mr. Enerman responded that information was not available and would not be included. The total residential kWh under PCE and for each utility and the number residential customers would be included. The calculated average annual use per customer could be made with that information, otherwise, only estimates can be made. Co-Chair John Torgerson asked about the data. Mr. Enerman replied he would be using data from FY96. Data from FY97 and FY98 had not been compiled and examined at present time, however, if possible, he would use more current information. Co-Chair Torgerson asked if the data would be more current than 1986. Mr. Enerman did not believe that it would be because at this time, that is all which has been published. Senator Adams asked Mr. Enerman's spreadsheet could indicate the effect of changing the floor from 9.9 to 10.9. Mr. Enerman acknowledged that was his intent. BRAD REEVE, General Manager, Kotzebue Electric Association (KEA), Kotzebue, (Testified via Teleconference), testified that having power is an important aspect of the future. He stated that a flat 350 kWh per month rate would not adequately recognize the actual use patterns in Alaska. Mr. Reeve added that KEA has raised two other utility grade wind turpins in Kotzebue. He suggested that would be the technology that will benefit rural Alaska. The goal is to reduce annual diesel consumption by about 300 thousand gallons annually. The program allowed communities to maintain power plants while they investigated alternate power sources that were less expensive. Mr. Reeve anticipated that diesel would continue to play a large part of power for communities in the future. WALTER SAMPSON, NANA Corporation, Kotzebue, (Testified via Teleconference), voiced his appreciation of the Committee's effort to address the rural power situation. He restated the high cost of fuel in rural Alaska and the difficulty in getting it those remote areas. He pointed out that there are fears in many communities that power systems will be shut down. Mr. Sampson urged the Committee to give communities an opportunity to look at alternative fuel sources. Co-Chair John Torgerson noted that the bill would be held in Committee. SB 157 was HEARD and HELD in Committee for further consideration. SENATE BILL NO. 68 "An Act relating to cooperation with federal programs relating to management of fish and game." CS FOR SENATE BILL NO. 68(RES) "An Act relating to cooperation with federal programs relating to management of fish and game." BRETT HUBER, Staff, Senator Rick Halford, testified that the intent of the proposed legislation is that the State should not be left with the burden of unfunded federal mandates. He pointed out that the Court system has agreed with this. Alaska became a state in 1959. In accordance with the Statehood Act, Secretary Fred Seaton transferred the fish and wildlife management responsibilities to the new State in 1960. Since then, Alaskans have witnessed the continued erosion of their fish and wildlife management authorities. Mr. Huber pointed out that passage of federal legislation such as the Marine Mammal Protection Act, the Endangered Species Act, the Magnuson Fishery Conservation and Management Act, and the Alaska National Interest Lands Conservation Act have all contributed directly or indirectly to the loss of jurisdiction. Mr. Huber continued, equally important are the administrative actions and legislative interpretations developed by the various federal agencies. In a recent transmittal to the Superintendent of Glacier Bay National Park and Preserve, Governor Knowles clearly indicated the growing conflict with the federal agencies. Mr. Huber commented that the Governor has commented on the proposed rule to phase out commercial fishing in Glacier Bay proper and to develop a cooperative management and planning system for the remainder of the marine waters. The 1998 Congressional amendments to Glacier Bay National Park and Preserve (NPP) did require cooperation in the development of a management plan. Mr. Huber pointed out that it was obvious from the environmental assessment that the agency would attempt to exercise its prerogative of overriding State management when the agency decides the necessity to protect the park "resources and values." Mr. Huber noted that Alaska's fisheries management has been more successful than the Federal management it succeeded. Although most resources are transient to the Park, it is believed that Alaska will now be required to establish a much expanded and expensive research and management program just to satisfy the demands of the National Park Service, which has taken the form of an unnecessary and unfunded mandate. Mr. Huber stressed that there are a growing number of unfunded mandates associated with the preempted actions of the federal agencies. On June 6 and 7, 1996, the U.S. Fish and Wildlife Service released material related to the implications of Federal Management of Subsistence Fisheries in Alaska. The document states that two scenarios could occur for Federal subsistence management. The first scenario would assume that the State of Alaska would cooperate with the federal managers, allowing federal management activities to supplement State management in a partnership effort. The second scenario assumes that the State would not cooperate, requiring a complete duplication of the State system with federal staff to perform all management. He warned that would be more expensive. Mr. Huber continued, Congress and the Federal Courts have made it clear that states should not be faced with unfunded Federal mandates. During this period of severe State budget deficits, Mr. Huber noted that it is important that the Federal government pay its share, especially when it is the intent to preempt traditional State management of resources. Mr. Huber advised that the bill would not prohibit the cooperation of the Federal agencies. It would require that when Federal actions restrict State management of fish and game resources, the State would be fully reimbursed for any action taken in that cooperative effort. Mr. Huber listed the points of the Alaska National Interest Lands Conservation Act (ANILCA) unfunded federal mandate. ? To date, the federal preemption under ANILCA of State fish and game management has been mostly applied to wildlife. ? State management costs have increased significantly in an attempt to comply with federal law. ? ANILCA provided for reimbursement of up to $5 million for 50% of the State's effort to implement subsistence provisions in law. ? The federal government has never provided over $1 million, despite the fact that the State has consistently submitted $2.0 to $3.5 million in reimbursable expenses. ? The reimbursable expenses submitted to the federal agencies should have been much higher, as expenses associated with data gathering required by the Advisory Committees and Regional Boards, although, they qualified for federal reimbursement and were never submitted. ? The federal agencies used the State technical staff as management instructors until they reached a point of self-sufficiency and technical independence. This is clearly illustrated by the areas where State wildlife management decisions have been preempted by the federal process. ? The federal agencies are now proposing to duplicate the same process for fisheries. ? To illustrate how much the State is spending to facilitate federal management, the "Implications of Federal Management" booklet indicates that it would cost $9 million dollars to implement with State cooperation and $31 million dollars to implement without State cooperation. In other words, the State is subsidizing the federal program to the tune of almost $22 million per year. Senator Adams questioned if Senator Halford would support cooperation between the State and the federal government in the management of the State's fish and game resource. Mr. Huber believed that Senator Halford did not favor duel management. Senator Al Adams questioned if the bill would send a message to the public that the Legislature has given up on the possibility of a resolution. Mr. Huber advised that there are other bills that recognize these issues. MIKE SALLEE, Commercial Fisherman, Ketchikan, (Testified via Teleconference), spoke in support of the proposed legislation. He stated that if there was a federal takeover that the State should not be required to pay the costs of operation. Mr. Sallee voiced concern with Section 1(a) and the viability of the fish and game population. LANCE NELSON, Assistance Attorney General, Natural Resources Section, Civil Division, Department of Law, Anchorage, (Testified via Teleconference), stated that there were several legal concerns with the proposed legislation. Mr. Nelson noted that the restriction of cooperation with the federal government could be unconstitutional and that the Legislature can not restrict the Executive Branch. He felt that the Court system would rule the law unconstitutional in relationship to the separation of power rules. Mr. Nelson was concerned that the restrictions would prohibit the State's ability to take legal action against the federal government for regulations on the management of fish and game. DICK BISHOP, Vice-President, Alaska Outdoor Council (AOC), Juneau, testified that the Council supported the bill. He stated that a stronger incentive or requirement for compensation for the State for costs associated with federal fish and wildlife management agencies is essential. Mr. Bishop added that even when the State was in compliance with ANILCA, the federal support that had been authorized by Congress was not fulfilled. He emphasized that fair compensation for services rendered are important in this concern. GERON BRUCE, Legislative Liaison, Office of the Commissioner, Department of Fish and Game, testified against the proposed legislation. He emphasized that it is a "sad day" when the Department of Fish and Game must testify before the Legislature on such a bill under consideration. He qualified that statement, noting that the preference would be to testify on a solution to prevent such a law. Mr. Bruce suggested that the way to accomplish that would be to put the vote before the people. Mr. Bruce reviewed the intention of the bill. Under SB68, the federal manager would be prohibited from speaking with the State manager, unless the agency from which that federal manager worked, had entered into an agreement to pay the State judicial costs to cooperate with the federal program. TAPE SFC-99 #109 Side B Mr. Bruce voiced concern that the information gathered by the Department would then be used against it. The obligation of the Department's activities is a function to fulfill the constitution mandate for sustained yield management. He questioned if the State assumes that the federal managers are going to assume the costs of a significant portion of the basic State responsibility. Mr. Bruce stressed that the Department does not believe that will occur. Under that situation, there are several possibilities which could happen and that none of them are good. Senator Lyda Green voiced her offense with the reference to the constitutional amendments and the issue of subsistence. Co-Chair John Torgerson requested Mr. Bruce to direct his testimony to the proposed legislation. Mr. Bruce stressed that SB 68 is about subsistence. He noted that the Department of Fish and Game has urged the Senate Finance members not to move the bill from Committee. He advised that such a move would not be of benefit to the Alaska fishery, resources or the people of the State. Co-Chair John Torgerson advised that the "sad day" was when Governor Knowles failed to defend the State of Alaska's rights issue through the Court System. He believed that was the "problem". Co-Chair John Torgerson ordered the bill to be HELD in Committee. SB 64 was HEARD and HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 10:50 A.M. SFC-99 (18) 4/23/99