HFIN-260513-1330

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Good morning, everybody. Going to be late. Okay, I'll call this meeting of the House Finance Committee to order. Let the record reflect that the time is currently 2:12 PM on Wednesday, May 13th, 2026. And present, we do have Representative Allard, Representative Stapp, Representative— thought I saw Representative Bynum, Representative Kocher-Schraggi, Representative Kocher-Josephson, Representative Jimmy, Representative Galvin, Representative Tomaszewski, Representative Hannon, and myself, Co-Chair Foster.

And just a reminder, folks can mute their cell phones. We have a pretty full agenda before us today. Maybe before I get into that, we do have 5 bills, but just to kind of let folks know what the pacing looks like in terms of the last week that we have before us before we sine die, end the session.

I would like to— if we can go till 5 or 6 PM for the next few days and try to knock out as many bills as possible, that would be great. It is heavily dependent on what happens with the floor and how tired folks are.

And then in the last few days of session, we might go into the evenings. And then the other issue is in terms of House bills, I know that some folks have asked why hear House bills if they have a long way to go on the Senate side. There are some plans I know to roll some bills into some Senate bills or other bills. And so, so there are some of the bills are still in play. In terms of Senate bills, they've been kind enough to hear a lot of House bills And so we are trying to return the favor and make sure that we hear some Senate bills and return the favor.

This is the last stop for Senate bills. And so we're going to make a big push to try to get through as many as we can. And so with that, in terms of the 5 bills that we have up today, House Bill 258, that's the Senate spay and neuter bill. We'll finish up with questions on that. And then next we'll go to House Bill 260.

That's the construction project wages and liability ability bill. We'll go to questions and then review the fiscal notes. And from there, we've got Senate Bill 130. That's the Fish Production Development Tax Credit bill. I believe we have 2, I think, amendments for that.

We also have with us Representative Moore.

And, and then after that, we'll take up an introduction to Senate Bill 211. That is extend occupational licensing boards. And then we'll return to House Bill 381. And when we get to the gas line bill, we will go to questions for Glen Farn. We'll finish out our Q&A with Glen Farn, and then we have the DOR presentation that we were supposed to hear 2 meetings ago.

And after DOR, we've got Gaffney Klein, who was asked to be last just because what they have to say will build upon what some of the other presentations have. So with that, I know we also will be back on the floor, I believe, at 3 o'clock. And so we'll probably be going late. We have quite a few amendments, I believe, on the capital budget. So we might have a late day today.

Representative Hannon. Thank you, Mr. Chairman. That was— I am a little confused by the instructions. So are we going to stay here till 5 or 6? Then go to the floor?

Are we returning to the floor that's been recessed till 3:00, and then after it's done, coming back to finance, or is that not yet determined? Uh, we will go back to the floor at 3:00, and then, um, I was hoping to at least be in finance till 5:00 or 6:00 PM in the next previous— next few nights. However, if we are doing amendments until 5:00 or 6:00 on the floor, then we'll have to reassess the situation, see how tired folks are. If we have a consensus to want to come back, we can do that. But if folks are burnt out, then we won't.

Okay, so one follow-up to clarify. When you are referencing being here in finance until 5 or 6, you are talking about tomorrow and the next day? Correct. Because we are going back to the floor at 3 and likely from the 24 amendments that were handed out before we recess to be there until 5 or 6. Very possible we could be on the floor until 5 or 6 and then we could come back here, but we'll check in with everybody to see if folks still have gas in the gas tank to want to keep going into the night.

So good question. Yep. Okay. So with that, Representative Stapp, if you would like to, I guess, maybe just give us a super brief recap of the bill and then we'll open it up to questions. And thanks, Representative Stapp.

Thank you, Co-Chair Foster. Statewide bayoneta program. That's all I got. Thanks. Okay.

Do we have any questions for the sponsor? Is this regarding the—. Bayoneta, correct? HB 258 is before us. Yes, thank you, Co-Chair Foster.

And I'm happy to take this offline, but I would like to hear thoughts about other states and which state model you were following. Also, if you had looked into other nonprofits and whether they could be the carrier of the work that needs to get done as opposed to adding more government, if you will. I fully support the program. I just wondered if you had considered a different agent to help relieve some of the operating costs. And again, I'm happy to take this offline.

But I want to make sure that we put that on record. Those are the couple of things that I'm thinking about. Representative Staff. Yep. Thank you, Co-Chair Foster.

Through the Chair, Rep. Galvin. I'm certainly open to anything. I'm totally okay if you want to offer amendments that look at maybe transforming some of the aspects to this grant-based program. I would like to preserve kind of the nucleus of the funding, i.e., license plates, click it, give, that type of stuff. Oh yeah, that's important how it comes in.

Pardon me, through the chair. I appreciate that. I want to make sure that we include avenues for funds to come in, especially for all of us who look forward to participating in that program. I really think it's important. So thank you.

Further questions for the sponsor? Okay, hearing none, I think we're good. And so with that, just a reminder for House Bill 258, that is the Statewide spay/neuter program. We're going to set the amendment deadline, as was mentioned earlier, for Friday, May 15th at 5 PM. And so we're going to jump right into the next bill, and that is House Bill 260.

That is the construction project wages and liability bill. Representative Josephson, if you could, you or your staffer, Mr. Ken Alper, would you like Ken Alper to come up? Mr. Representative Josephson. No, since I don't see him. Mr.

Chair, can I remain seated where I am? Absolutely. And your question is you want a reminder on the bill? Is that the essence? Yeah, just 2 or 3 sentences in terms of what the bill does, and then we'll go over to the fiscal notes on the bill.

Sure. So the bill has 2 features. Feature 1 relates to certificates of fitness. And it's designed to ensure that plumbers and carpenters in particular have certificates of fitness, and failing that, there can be administrative penalties rather than, weirdly, a B misdemeanor conviction, which is what the law requires now if someone's working without one. There's a graduated sort of penalty phase, a warning and In Part 1, Part 2, there's a fine and, and, and can be removal of the certificate or, or the lack of a certificate, I guess.

The other part of the bill is wage theft, and it relates primarily to it, the fact that a lot of subcontractors work and then disappear and their employees are unpaid. And it's designed to self-police, so it puts a joint and several liability burden, one might call it, on the project manager and general contractor. However, they get the cooperation of a subcontractor who must provide payroll information and prove that they've not been subject to penalties of their own. So these are features, the two principal features of the bill. Great.

Thank you very much for the reminder in terms of what the bill does. And we're going to jump right into the 3 fiscal notes that we have on the bill. And if I could have Ms. Sylvan Robb come up to the table and put yourself on the record and walk us through the fiscal notes.

Good afternoon. Thank you, Mr. Chair. For the record, Sylvan Robb, Director of the Division of Corporations, Business and Professional Licensing. Uh, this is the fiscal note for OMB component number 2360.

The control code is TBITD. Um, we have a fiscal note of.

$97,600, Um, in fiscal year '27, um, and then that decreases to $95,000, um, in fiscal year '28 and the remainder of the out years. Um, those funds would be paid through professional licensing fees. So these are DGF, um, and the anticipated costs are related to, uh, potential, um, legal fees and hearing costs. Great, thank you. Any questions from the committee?

Seeing none, thank you very much, Ms. Rupp. And the two other fiscal notes that we have up are from the Department of Labor, and it looks like we've got Mr. Jeremy Applegate online. If you can put yourself on the record, Mr. Applegate. Yes, for the record, my name is Jeremy Applegate, Chief of Wage and Hour for the state of Alaska. Mr. Applegate, can you get a little closer to the mic?

Is this better? Not much better. Maybe a little closer, a little louder.

I'm hoping this is all right. Probably the best I can do. Yeah, if you could speak up a little louder and we'll just have to make do. Mr. Applegate.

All right. Yeah. So this is Jeremy Applegate, Chief of Wage and Hour for the State of Alaska, for the record.

Go ahead.

Mr. Applegate, are you there? Yes, I'm here. Please proceed.

My name is Jeremy Applegate, Chief of Wage and Hour for the State of Alaska. Okay, we're gonna walk us through the fiscal notes. Oh, I'm sorry. Yes, this is fiscal notes, control code number MNJDE, and it is a zero fiscal note. We don't see any fiscal impact for wage and hour from this bill.

Okay, and are you also going to be walking us through the other fiscal note? It looks like maybe Scott Damerow is walking us through the other one. Are there any questions on this fiscal fiscal note? Okay, seeing none, thank you very much, Mr. Applegate. Next up we have Mr. Scott Damero.

If you can put yourself on the record.

For the record, my name is Scott Damero, Chief of Mechanical Inspection for the Department of Labor and Workforce Development. Through the chair, fiscal note control code COPLK has some significant line items in it. One of these would be the hiring of an administrative assistant to manage the hearings. We don't have the staff that could manage hearings at the moment. We are anticipating roughly 50 hearings per year for the first couple years until contractors either drop out, leave the state, or get compliant.

The hearing cost is significant. Each hearing is estimated at $15,000. That could go higher and some could go lower, but we've weighted this to the high side because as contractors will have their registration at stake with these, I expect that they will fight tooth and nail on every hearing. So we expect all of these to be contested. Um, some few may be reduced.

But even if they're reduced, any fine would be forwarded to Commerce. I will say also, since there's no sundowning on this effect, a contractor would know that being fined today and then being fined 3 years from now, that would be their second offense. And many contractors that we find have multiple offenses at once. So the hearings are expected to be fairly costly. And that accounts for really all of the fiscal note.

It's hearing fees, our legal fees, and the hiring of administrative assistants in order to manage those hearings.

Okay, thank you. Do we have any questions? Representative Hannan? Thank you, Co-Chair Foster. Mr. Damerow, using the figure 50, does that come from you have 50 cease and desist orders currently given on an annual basis to contractors who have employees without certificates of fitness working?

Is that an average or an annual? Mr. Damerow. No, this will dramatically increase— I'm sorry, through the chair— this will dramatically increase the number of citations that we issue. Right now we have the ability to adjudicate these. The proposed legislation says that we shall impose the fine.

So we do not currently impose fines or any other— anything other than compliance requirements. Also, this expands the scope of this to be all the entire COF statute as well as adopted regulations, which means that we will also be issuing fines for inappropriate use of an apprentice on site. A worker that has a COF that's a few days expired, the contractor would get this. If a company submits paperwork that demonstrates that they worked a worker when he was not licensed, they would get this fine. So our enforcement would greatly expand based on this.

50 Was an estimate of approximately one per week being processed. And that may actually be a low estimate. But once word gets out, we hope that that's the high side. Representative Pannon, follow-up. So thank you, Chair Foster.

So Mr. Damerow, did I hear you say that you have once a week your compliance officers notice someone out of compliance with certificates of fitness? At least, yes, at least through the chair. This is This law, the current law, allows us to use discretion. So we have a more compliance-based model. It's— one example would be a company coming up from out of state.

They bring a few workers with them. They don't know the laws in Alaska. We go out on site, we find— we issue cease and desist letters, and they want to correct it. So that same day, they give their people the time off to submit licensing to the state. We get them licensed.

We would not typically enforce on that, but if they had 4 workers on site, that would be 4 violations right there. Under this proposed legislation, we shall impose a fine on that contractor for each of those violations. So that would be 4 infractions that we would get on that one job site. And yet, once a week would not be out of line for this. Now, this is not— the once a week would not include just someone that's not work— that's working without a license.

Typically, it's someone that's working on an expired license, or someone has not got their license yet, but it's in process, or an apprentice that's not being supervised directly, 3 apprentices on site instead of 2 being supervised. Any of those would also qualify. We're not talking about just lack of a license on site. There are many other rules that we would be fighting for here.

I do one more follow-up. When the legislation was presented to us, it makes great sense to me as the sponsor described it, that right now it's a criminal prosecution that's required. Therefore, it rarely goes through an adjudication. But turning it over to a misdemeanor and an administrative process would mean these are resolved fairly rapidly. That makes very rational sense to me.

But you're describing a scope of problem at a magnitude substantially higher than I thought we had. And we are not— we're not going through enforcement, as you're saying. You're just using a compliance encouragement. So, just, it's giving me a different understanding of the scope of the problem that this legislation is attempting to address. It's much bigger.

I've got—. You did— can I offer some questions? Is that a question? No, that was my conclusion. Do you want an opinion on that or not?

Yes, tell us. Okay. So, through the Chair, yes, I would say that this is a much more pervasive problem Because it, it's not our problem out in the field. It's not simply some person that wants to do electrical work that doesn't have a license and they go out and do that work. The problem is far more often a paperwork issue of compliance with the proper certificate, the proper documentation, the proper apprenticeship ratios, using an apprentice that is registered in the apprenticeship program properly.

So those are the more common issues that we see. It's fairly rare, I think, to find someone that is, for lack of a better word, scamming the system and just doing regulated work without a regulation. What we find much more commonly is someone that doesn't understand the law, and by correcting them, we achieve the result we want. But this— my fear is this regulation, or this change, this.

Change that we shall impose a fine on a registered contractor for violations will mean that we have no more discretion. We will become a heavy enforcement model rather than a compliance model, and those fines will be many.

If I could clarify one small thing—. Representative Josephson. Thank you, Mr. Chair. I promise not to hog time.

Rep. Hannon, if I heard you right, understand that under this bill the misdemeanor goes away altogether. So it's purely a fine. And that's because the DA's office frankly wants nothing to do with this. And so we end up with a lack of enforcement. Thank you.

Okay. And after Representative Hannon, I've got Representative Galvin and Bynum. Representative Galvin. Thank you, Co-Chair Foster. Through the chair, and we're I'm looking now at the fiscal note here, and my question is about the fiscal note.

In terms of enforcement, are some of the costs offset by the fines? Is that the way that you read the law? This, this bill?

Is that question for me? Yes. Okay, through the chair, no, we are self-funded. The money that we make through the COS program goes into our building safety account. The money we receive in fines goes directly to general funds, so there is no offset for our organization.

We would be fronting all the money for all of the hearing costs on this. Okay, thank you very much. Okay, Representative Bynum. Thank you. Thank you, Co-Chair Foster.

Through the Chair, I thought I heard on the testimony there that if you were to go out to a work site and you find 4 people working that are in violation, as you would say, that that's 4 separate violations. Is that accurate? Mr. Damrow? Through the chair, yes, that would be each certificate of fitness. Each worker that's working without a license would be a separate violation.

So if we found 4 people, that would invoke the first, second, third, and fourth offenses. That contractor, as I read this, would be permanently barred from having registration in the state of Alaska at that point. Yeah, through the chair, Representative Bynum. Yeah, I appreciate that clarification. I'd heard that and was looking at the statute.

I thought the same thing. I'm like, holy smokes, we're going to— for going out to the site, even if it was— I guess the law says knowingly, but even if they knew, they'd immediately be banned because we don't define the term violation in the statute. So I think that's something for us to consider as a committee. Okay, Representative Stepp, question for Mr. Demrow. Yeah, thank you, Mr. Demrow.

Just to clarify, so Are you saying that if you got your apprentice count wrong 3 times, you could be barred forever through the chair by the way the bill reads? Through the chair? Yeah, that's the way I understand this, is that we would— if, if you had on— if we visited your site and you had 3 apprentices that were working that were not properly registered or not properly supervised, that would be 3 violations that we would issue. We would then forward those 3 violations to the Department of Commerce, which as I read it would be required that they now permanently suspend that registration. And that's the basis for me assuming that all of these hearings will be fully contested.

If I were a contractor, I'd say whatever I had to not to go out of business. Just can I ask the sponsor of the bill a quick question? Representative Sand. Yeah, thank you, Co-Chair Foster, the Chair, to Co-Chair Josson. I'm just curious if that's what your intent was.

What we just heard in the bill. Representative Josephson. Representative Stapp, my focus in sections 1 and 2 related to the failure to have a certificate of fitness.

The apprenticeship issue is something I'm unfamiliar with, and it sounds like something that may require some review.

I would say that part of the reason for the larger fiscal note from Mr. Damerow is because, as we've heard, there's a lot of abuse. In fact, the PowerPoint notes that a study by the Century Foundation of construction workers in Alaska found that 14.6% were misclassified and that an estimated $30 million in payroll and taxes was avoided by contractors not following labor rules. Now, the bill doesn't focus on independent contractors, and by the way, we have one of the authors of— certainly a serious participant in a Walker effort to define independent contractors with us in the audience. But at page 3, lines 15 to 18, It notes that if you are an independent contractor, and legitimately so, then you would— well, I would have to see— I would have to look at this again. That may be a sort of get-out-of-jail provision because you are providing for those wages.

This is designed to, as I said, self-police down the chain of workers.

Yeah, that section talks about there being a rebuttable presumption that everyone at the site is an employee unless they can prove they're not. If they're an employee, then there would be joint and several liability for their wages. So this is the first I've heard from someone like Mr. Damero about other incidental consequences. One last comment I would make. Representative Josephson.

I think that the heft, if that's what you think it is, of the burden on OAH, the Office of Administrative Hearings, relates to the number of violations. Something that Rep. Hannon got into with Mr. Damero, that this is a problem. And it makes the good actors question why they're good actors. And that's yet another problem. Representative Stout.

Yeah, thank you, Chair Foster, and thank you, Coach Justin, for the answer. No, I agree with you, I guess, on the problem. I'm just— I'm a little afraid of the nature of the solution at the moment because I don't think the intent is to show up at the job site and then inadvertently have 3 separate violations that now make you ban your license on a first site visit. So I'm just saying that we might want to try to fix that. Thanks.

Representative Bynum. Thank you, Co-Chair Foster. You know, when I look at this statute and what we're trying to fix is we're trying to make sure that work sites are safe and that work is being done in a professional manner. The certificate of fitness program is not intended to do anything more than that. It is intended to make sure that the public is safe and people are safe and that qualified people are doing work.

So I think one of the challenges I have is that when we talk about enforcement is we look across the state and say, well, how is enforcement happening now? And there is almost none across the state, even in organized boroughs. So as an example, in my borough, we have a first-class city within the borough, and in the city they have their own inspection and compliance to the law and making sure all these things are happening at the local level. But if I drive 7 miles north, I go into the— or into the organized borough, but we don't have these powers. And so we depend upon the state to do the inspections.

And I can count on one hand how many times I've actually known that the inspector was in town, and I can't even count on one hand how many times I actually met the inspector. And I was the director of the utility. So when we talk about enforcement, I think we have a real issue here. And I'm talking about an organized area. If I go over to Prince of Wales Island that's unorganized and we're depending upon those same services, we have a real problem.

So if we're really trying to solve public safety, safety of individuals and ensuring quality workmanship, I think we have a bigger problem on our hands than what this bill will will attempt to even solve. Representative Josephson. Well, one thing I would say, and I'd have to look at the language of course, but it could be that in the example Mr. Damerow gave of four people who were not properly authorized to work at a site, that that would be sort of, in the Criminal Code they call that concurrent. It would be basically one bad act. That might be a friendly way so that we're not pulling a license from one series of events.

I'd have to give that more thought. Representative Bynum. Thank you, Co-Chair Foster. Just really quick, and I wasn't implying that we push more burden onto the organized areas, but this is a real problem and it is something that I think when we talk about policy statewide and how we're going to deal with it, that we do more than just this narrow look.

Should have a holistic view— review on how we're going to ensure the public safety, quality workmanship, and that work is being done in a professional manner. So I look forward to more conversation as we move through this. Okay, seeing no— Representative Tomaszewski. Yeah, thank you, Co-Chair Foster. So I think when in terms of the apprentices, that was spoke about.

So a certificate of fitness is actually required also for a trainee or apprentice. So it's not just the journeyman electrician or the journeyman plumber, it's also the trainee or apprentice. And so, but that is a 3 strikes you're out one time. I think that is cruel and unusual punishment that you could put on any contractor, and that really should be taken a second look at. Thank you.

Okay, seeing no further discussion, um, as a reminder, the amendment deadline that I set this morning, that is Friday, May 15th at 5 PM. And so if there is nothing else in terms of questions for the sponsor or Mr. Damero— uh, Representative Moore Thank you, Co-Chair Foster. Sorry, I'm just, I'm just reading over the text and looking into this just a little bit more. And so I think I just want to ask the sponsor just a clarifying question. Their registration can be suspended after a second violation and then permanently revoked after a third.

Is that what— is that the correct intention of the bill? Representative Josephson. Through the chair, Representative Moore, that is correct. And that actually was a Sadler amendment in Labor and Commerce that was designed to graduate or tier the penalty in a more generous way. Okay.

Thank you. Okay. Seeing no further— Representative Staff. Wouldn't you say the amendment deadline was again, Chair? That will be on Friday, May 15th at 5 p.m.

Thank you. Okay, um, hearing no further discussion on HB 260, we will set the bill aside. And we are next going to jump into— I think we've got two bills that we've taken care of. So we've got 260, which is Fish Development Product Tax, and after that we have Senate Bill 211, that's the Occupational Licensing Boards. And then we'll be back to the Gas Line Bill, which is HB 381.

So SB 130, Fish Production Development Tax. If we could have Mr. Tim Lampkin come up to the table, I believe. I don't see Senator Stevens. Looks like you're the representative today. And just so folks know, we have heard the bill 3 times in committee.

We've had public testimony, we've had invited testimony, we've reviewed the fiscal notes, and we have 2 amendments before us. And again, that's SB 130, Fish Production Production Development Tax. And I think everyone's got the amendments in front of them. And Mr. Lampkin, if you can just put yourself on the record, give us the real quick summary of what the bill does, and we'll jump into the amendments. Thank you, Mr. Chairman.

For the record, Tim Lampkin, staff to Senator Stevens and to the Joint Legislative Task Force Evaluating Alaska's Seafood Industry. Just to clarify, I come to you with that hat on. This is legislation that was resultant of the work of that task force, Latin Over 24, in January '25. This bill is one of many recommendations that the task force made that would help incentivize investments and innovations in new technology and bringing value-added seafood products to market in Alaska, stimulating our economy and jobs and so forth. That's a quick summary of the legislation before you.

It Happy to answer your questions. Okay. Before we jump into the amendments, does anyone have any questions for Mr. Lambkin? Seeing none. Amendment number 1 is by Representative Moore.

Would you like to move your amendment? Thank you, Co-Chair Foster. I am not going to be offering amendment number 1 at this time. We have some work to do on it. There is a one little issue and we don't want to have any unintended consequences for this bill.

So I will not be offering amendment number 1. Okay, Amendment Number 1 will not be offered. And so that takes us to Amendment Number 2. Representative Moore? I will not be offering Amendment Number 2 at this time.

Okay, Amendment Number 2 will not be offered.

Okay, so with that, if there are no further questions of the committee, uh, I would entertain a motion I'm going to just make sure we don't have any questions. I see some folks looking through their packets, so I'm just going to give it a quick moment, make sure we don't have any questions. I don't see any. So with that, Representative Schrag, I would entertain a motion to move the bill if it's the will of the committee. I move SB 130, Work Order 34-LS0735/T, out of committee with individual recommendations and attached fiscal note.

And I don't think this is necessary, but just in case, and I ask the House Finance Committee be given authorization as well as legislative legal to make any technical or conforming changes as necessary. Okay. Do we have any opposition, objection to moving the amendment? Seeing none. SB 130, which is version 34-LS0735/T.

Moves out of committee with individual recommendations and attached fiscal note, and House Finance authorizes alleged legal to make any technical and conforming changes. So if folks can sign the committee report. Mr. Lampkin, any, any final words? Just on behalf of the task force and Senator Stevens, want to thank the committee for your due diligence and wise consideration of this legislation. Great.

Okay, well, thank you very much. And please pass our regards on to Senator Stevens. So with that, our next bill is Senate Bill 211. It is the extend occupational licensing boards. And let's see here, in terms of staff to Senator Bjorkman, is Mr. Matt Churchill here?

I don't see Mr. Matt Churchill, so I'm going to take a brief at ease.

Okay, House Finance back on record at 2:51 PM. The date is May 13th, 2026. And moving on to our next item of business, uh, we have again 5 bills before us. We're on the 4th bill, so we're moving along pretty quickly here. The next bill is Senate 211.

That's the Extend Occupational Licensing Boards. If I could have Mr. Matt Churchill, staff to Senator Bjorkman, come to the table, put yourself on the record, and if you can introduce yourself. And then after that, we'll go to— and also, well, after that, we'll go to Ledge Audits and hear from them. And so, Mr. Churchill. Thank you, Co-Chair Foster, uh, Shruggie, uh, and members of the House Finance Committee.

Uh, Senate Bill 211 extends the sunset dates of 6 professional boards: those of professional counselors, marital and family therapy, psych— psychologists and psychological associate examiners, real.

State Commission, Certified Real Estate Appraisers, and Social Work Examiners. The legislative audits of each of these boards concluded that the boards did serve the public interest, and SB 211 follows the extensions recommended by the state's audits for each of the boards. Mark Lundahl, our Deputy Legislative Auditor, is here today to address the committee in more detail regarding the findings and recommendations contained in the state's audits. And Director Sylvan Robb of the Division of Corporations, Business and Professional Licensing is with us as well today and available for questions the committee may have regarding the bill's fiscal note. Thank you again for hearing this bill today.

Great. Thank you very much. And so with that, we'll go ahead and have a leg audit come up. And I believe the person today is Mr. Mark Lundahl. Deputy Legislative Auditor, if you could put yourself on the record and give us your review of each of the audits.

Good afternoon. For the record, I'm Mark Lundahl, Deputy Legislative Auditor with the Division of Legislative Audit. It is an honor to be here to brief the committee on the results of the sunset audits we performed on the 6 boards being extended by SB 211. Overall, a common conclusion for each of the 6 boards was that they served the public's interest by conducting meetings in an effective manner. They amended regulations as needed and generally licensed the regulated professions in accordance with state law.

However, each of the boards had areas for improvement which impacted the length of the extensions recommended in the various audits. The maximum extension is 8 years. Extension recommendations shorter than 8 years are to help ensure that corrective action is taken to address the deficiencies identified in the respective audits. With your permission, I can proceed with a brief overview of each individual audit, including any recommendations or noteworthy conclusions. Please do.

Uh, the first audit is of the Board of Marital and Family Therapy. The audit recommends that the board's termination date be extended the full 8 years to June 30, 2034. As of January 2025, this board had 116 active licenses and had an operating surplus totaling $197,000. We had two recommendations in this report. First, we recommend that the Boards and Commissions Director work with the board to identify potential applicants to fill the board— vacant board seat in a timely manner.

One of the two public member seats had been vacant for 32 months. Uh, vacant board positions can impair the board's ability to conduct business. It increases the workload of other board members. And delays investigations and may result in canceled board meetings due to a lack of quorum. The second recommendation is that the board ensure the renewal licensing application is sufficient to monitor compliance with teletherapy-related continuing education.

The teletherapy continuing education requirements are relatively new and only apply to licensees that provide services remotely. The audit found that the board has no way to identify which of their licensees are subject to the continuing education requirement and therefore are not tracking compliance. Based on their management's responses to the audit, the governor's office, the DCCD commissioner, and the board chair all concurred with the report's conclusions and recommendations. Okay. Do we have any questions on this audit?

Representative Moore? Yeah. Thank you, Co-Chair Foster. Has the public board member seat been filled?

Through the chair to Representative Moore, I would have to check on that. I am— I'm not Off the top of my head, I don't know. Very good, thank you. Okay, and I see no further questions. Mr. Lindahl.

The next audit is of the Board of Social Work Examiners. This audit also recommends that the board's termination date be extended the full 8 years to June 30, 2034. As of January 2025, this board had 1,299 active licenses and an operating surplus of $183,000.

However, we concluded that board fees were not set at a level that covered regulatory costs, but general fund allocations prevented the, a deficit for this board. This board also had two recommendations. The first is that the Boards and Commissions Director take steps to ensure board seats are filled in a timely manner. One board seat had been vacant for over a year, and another board seat had become vacant after we began the audit, which left two of the five board seats vacant. The second recommendation is that the Board Chair and DCBPL Director work together to ensure applicants comply with continuing education regulations or seek a regulation change if deemed necessary.

DCBPL's online renewal application directs licensees to self-certify they have successfully completed the required CPE. However, regulations require they report specific information regarding courses, instructors, dates of attendance, and other details. Generally, the Governor's Office and the DCCED Commissioner concurred with the recommendations. The Governor's Office stated that 3 applicants were reviewed for the board seat, however, none were found to be suitable for the appointment. The board chair also concurred and noted that the board's vacancies have led to delays in processing applications, canceled meetings due to lack of quorum, and also delays in closing out investigations.

Okay, and any questions on this audit? Seeing none, I'd like to invite, if he is interested, Senator Bjorkman up to the table, if you'd like, just to field questions. The other thing I wanted to note is I mentioned earlier that we would have to go back to the floor at 3. I see there is now an email out that says floor is at 4:30, and so we'll either go till 4 or 4:30. 4:15 Depending on when there may be a meeting before that of the caucuses.

And so with that, Representative Hannan, do you have a question on this audit? No, Mr. Foster, but I was just going to sort of footnote Representative Moore's question about the length of the board, whether the board seat on the marital therapy had been filled. And I see that Ms. Robb's here in the room, but we should go through with the— my recommendation is that at the end we might just bring Ms. Robb up and know that we are going to be asking about the vacancies that were noted in audits and if we could find out the updates on those. Okay. So after the conclusion of the reviews, we will go to Ms. Robb.

Mr. Lindahl. Okay. The next board is the Board of Professional Counselors. The audit recommends that the board's termination date be extended 6 years to June 30, 2032. This board had 1,676 active licenses as of January 2025 and had a $210,000 operating deficit.

The audit concluded that fees were not sufficient to cover the cost of operation and fees were not increased in a timely manner. According to DCBPL management, a fee analysis was performed that supported increasing fees. Uh, the analysis was presented to the board at its September 2024 meeting where they approved fee increases. However, the fee increase was not made due to noncompliance with a new fee approval process established by the Office of the Governor. The audit identified a memo from the Governor's Chief of Staff that established a requirement that any new licensing fees must be approved by the Chief of Staff.

This approval process requires input from OMB prior to the request being made. How this works is first a Department Administrative Services staff submit the fee request to OMB for initial review. Then OMB staff determine whether a request would be forwarded to the Office of the Governor's Chief of Staff for final review and approval. The audit found that DCBPL staff sent this Board's fee increase request to DCCED's Admin Services Division. However, due to staff turnover, the division never forwarded the request to OMB.

As a result, fees were not increased and the Board's deficit is expected to continue to grow. Representative Hannan. Thank you, Co-chair Foster. Mr. Lindell, I presume you're not both an accountant and an attorney, but in reading statutes about how fees are set for these boards to be self-funding, they're supposed to adjust to make sure there isn't a deficit. Do you, as auditors, were you concerned about the legal status of a memo about the governor's office circumventing the statute that mandates that they self-fund?

Through the chair to Representative Hannan, compliance with state law is something that would be included in our audit of these boards and commissions. Yes.

Representative Hannan. And then I believe you said that the social work examiners also had a deficit. They didn't—. Oh. And were they able to catch up?

Were they able to adjust their fee and get themselves out of a deficit? Mr. Lundahl. Through the Chair to Representative Hannan, the Board of Social Work Examiners had an operating surplus; however, the surplus was— it exists because of general fund allocations. But for general fund allocations, the board would have operated at a deficit. Deficit.

Can I ask why we gave them a general fund authorization? Were they in a deficit and instead of directing them to increase their fees, we bailed them out with general funds? Mr. Lundahl. Representative Hannan, through the chair, I would have to defer to the management of DC.

CED. I don't think I can answer that. Okay. Thank you. Ms. Robb, would you like to, while we are on the issue, come up and put yourself on the record?

Good afternoon. Thank you for the record. Sylvan Robb, Director of the Division of Corporations, Business and Professional Licensing. Through the chair to Representative Hannan. I apologize.

Can you repeat your question, please? Representative Hannan. Thank you, Chair Foster. So Mr. Lindell, the auditor said that the Board of Social Work examiners had a deficit but was not in arrears and their fees did not go up because they received a general fund allocation. So my question is, how did that come about?

Did we decide to instruct them not to, or how did they get a general fund bailout versus increasing their fees? Ms. Robb. Thank you. Through the chair to Representative Hannan. During the pandemic, there was a pause on fee increases as many professional licensees were struggling, as were many individuals during that time period.

And so rather than increase fees, we received general fund that allowed us to keep programs from transitioning into a deficit without that fee increase. Those funds have come and gone, and so we are back to the statutory requirement that The programs are self-funded. Representative Hannon. Thank you. Since Ms. Robb is here and we're now— so on the Professional Counselors Board, the— again, Mr. Lindell said that the audit found that they were in a deficit and that their board authorized an increase of fees, but that they encountered a memo between how those fees could be instituted that needed to go to OMB and then to the governor's office before a fee increase for professional licensures could be executed.

Was that stemming from the pandemic pause when all of the boards were, or is that an ongoing thing that boards are not increasing their fees without authorization from the governor's office, which seems to be in conflict with the statutes that say they're supposed to self-fund? Ms. Robb. Through the chair to Representative Hannan, there is an additional layer of approval that's required. The fees for the two programs that Mr. Lundahl mentioned that are in deficit are fees that are required to be set in regulation per statute. And so those fee increases have been approved and are with the Department of Law as a regulations project on their way to seeing that increase implemented.

Representative Hannon. So one follow-up. Just to clarify. So the professional counselors fee increase is out for regulatory review in its final stages with the AG's office? And is it set at a level that will then bring them out of deficit and into compliance with being a self-funded professional regulatory board?

Ms. Robb? Through the Chair to Representative Hannan. Yes, the regulations project is with the Department of Law going through the stages of that review. And once that increase is implemented, that program will see itself emerge from deficit. Thank you.

Representative Galvin.

Thank you, Co-Chair Foster. Through the chair, there was a— the budget that came out to us, I was the subcommittee finance chair, so I was tracking one line related to corporate business and professional licensing. Division wherein the division, or through the governor, was asking for funds specifically for investigations. And I was not aware of the— what is in statute, which is, as you've heard from Representative Hannan, that each of the boards are going to be charging enough of their own license fees to cover their own investigations. And so I until I heard from the auditor, I did not know that that wasn't permissible, if you will.

So I guess my question is, how— what are you doing when there is not enough funds present for the investigations? Ms. Robb. Through the chair to Representative Galvin. So the request that was included in the governor's budget to switch the fund source for our investigations was unrelated to the funding for the programs in terms of them being in— having any sort of financial trouble. The issue and the reason for the request is because currently, because investigations are part of the cost that need to be covered by professional licensing fees, the, the system is set up so that those individuals who are practicing without a license, or those individuals who choose not to follow the rules and run up investigation fees and hearing costs, are being paid for by those individuals who choose to follow the rules.

And so we really have the good actors paying for the bad actors. And so in an effort to make that fairer, as well as see a decrease in professional licensing fees, we had requested that switch in the fund source for investigations. Is it all—. If I may follow up, Representative Galvin. Thank you.

And is it always the case then that each investigation is for someone who isn't paying for their own license? Is that what every investigation is for?

Through the chair to Representative Galvin. No, I apologize if that was confusing. Licensees do pay for investigations into unlicensed practice, but the majority of our investigations are investigations into licensed individuals. So those individuals have paid for a professional license, but then there's been a complaint and we conduct an investigation into that complaint.

Okay, thank you. Okay, Mr. Lundahl, the next audit. I believe I still have to go through the two recommendations for the Board of Professional Counselors. Okay. If I may continue.

The first recommendation is that the Boards and Commissions Director take steps to ensure board seats are filled in a timely manner. This board had a public member seat that had been vacant for 16 months. The second recommendation is that the DCCD Admin Services Director establish procedures to ensure fee requests are submitted submitted timely for review and approval. Per management's response to the audit, the Office of the Governor, the DCCDE's Commissioner, and the Board Chair all concurred with the conclusions and recommendations of the audit. We do note, though, the Board Chair requested an extension of 8 years rather than the 6-year extension that was recommended by the audit.

The next audit is of the Board of Certified Real Estate Appraisers. The audit recommends that the Board's termination date be extended 6 years to June 30, 2032. This audit found that board statutes may not fully comply with federal law. This board is subject to federal oversight by the Federal Appraisal Subcommittee, which reviews states' appraiser and appraisal management company regulatory programs for compliance with federal requirements. These reviews occur at least every 2 years.

The federal findings issued in 2024 indicate that statutory changes are needed to align state law with federal requirements. According to the board chair, legislation addressing the findings has not been introduced because they have been unable to find a legislative sponsor. As of January 2025, this board had 362 active licenses, registrations, and certificates and an operating surplus of $86,000. This audit had 3 recommendations. First, we recommend the boards and commissions director continue to work with the board to identify applicants to fill board seats.

The general appraiser seat had been vacant for 56 months. The second recommendation is that the Board should continue to seek a statutory change to address the Federal Appraisal Subcommittee findings. And the third recommendation is that the DCCD Commissioner— DCCD Commissioner work with policymakers to improve the recruitment and retention of investigators. This audit reviewed 5 Board-related cases that had been opened for over 180 days and found that all 5 —cases had unjustified periods of inactivity. The periods of inactivity ranged from 165 to 575 days.

Turnover and vacancies contributed to the delays, and one period of 575 days was due to untimely board member review. Management's responses indicated that the Office of the Governor, DCCD Commissioner, and the Board Chair concurred with the conclusions and recommendations. Of the audit. Okay, let's see any questions. Next audit.

The next audit is of the Board of Psychologists and Psychological Associate Examiners. This audit recommends that the termination date for the board be extended 5 years to June 30, 2031. As of January 2025, the board had 371 active licenses and an operating deficit of just over $91,000.

The audit concluded that the board's fees were not sufficient to cover the cost of operations. DCBPL did a fee analysis which showed that fees should be increased. However, management did not present the analysis to the board in a timely manner. Management chose not to submit a fee increase request because they believed that there would be delays in the new fee increase approval process, and management chose to prioritize other fee increases which were associated with new license types. This audit had 5 recommendations.

First, we recommend the Boards and Commissions Director work with the board to identify potential applicants to fill board seats and ensure quality.

Qualified applicants are appointed in a timely manner. As of March 2025, the public member and the psychological associate board seats had been vacant for 13 months, and a psychologist board seat was vacant for 33 months before and during the audit period. The second recommendation is that the board chair and DCBPL's director should work together to ensure renewal applicants comply with continuing education requirements or seek a regulatory change if necessary The audit found that all license renewal applicants were not reporting the details regarding their continuing education as required by regulation. The third recommendation is that board members should review investigative cases in a timely manner. This audit reviewed two board cases that had been open for over 1,000 days and identified one unjustified period of activity in one case that totaled 6— 656 days.

The delay was related to a board member not completing their review in a timely manner and a lack of alternate qualified board members to review. Review the case.

The fourth recommendation is that DCBPL's directors should ensure courtesy licensees comply with monthly reporting requirements. The audit reviewed 4 courtesy licensees and found 2 did not comply with the requirement that they report their— the number of days they practiced per month. The last recommendation is that DCBPL's directors should ensure that board's fees cover the cost of regulating the profession. The Office of the Governor, the DCCD Commissioner, and the Board Chair all concurred with the findings and conclusions in this audit. Okay, I don't see any questions.

We'll go to the next audit. Okay, the final audit is of the Real Estate Commission. This audit recommends that the commission's termination date be extended 4 years to June 30, 2030. As of January 2025, the commission oversaw 2,854 active licenses and 591 real estate office registrations. Uh, the Commission has an operating surplus of $807,000.

This audit made 5 recommendations. First, the DCBPL director should provide training and update written procedures to ensure minutes are prepared for all Commission meetings as required by state law. Our audit found that DCBPL wasn't recording minutes for committee meetings.

Recommendation number 2 is that the Commission chair should update regulations and forms to include independent contractors. The audit observed that the real estate industry has evolved away from employment relationships and licensees are typically independent contractors affiliated with brokerages. Statutes were updated in 1998 to reflect this industry change. However, the Commission never updated its regulations or forms. Recommendation number 3 is that the DCCD commissioner should work with policymakers to improve the recruitment and retention of investigators, and management should consider ways to assist the commission in clearing its investigative backlog.

Auditors reviewed 14 cases and determined that all 14 cases had unjustified periods of inactivity ranging from 160 to 726 days. The average delay was 14 months. The audit found there were 3 primary types of delay with many cases showing multiple types. First, the longest periods of inactivity related to DCBPL, waiting for a Commission member to accept a case for review. The second was Commission members took a long time to complete their review.

And third, there were delays related to vacancies and turnover. The fourth recommendation is that the Commission should consider seeking legislation to eliminate— to eliminate the Real Estate Recovery Fund. The Real Estate Recovery Fund was established to provide a remedy for loss suffered in a real estate transaction because of fraud, intentional tort, or deceit. Since 2018, state law has required licensees have errors and omissions insurance. Since the effective date of that law through January 2025, the recovery fund has paid only $50,000 in claims while collecting over $640,000 in recovery fund fees from licensees.

The audit found that during the audit period, virtually no claims were paid out of this fund. In summary, the fund has outlived its usefulness. The final recommendation is that the Commission should require license renewal applicants to submit a certificate of errors and omissions insurance coverage or seek a statutory change. Per management's responses, in general, both the Commissioner of DCCD and the Board Chair concurred with the report's recommendation. I'm just curious, when there's a recommendation to eliminate seeking legislation to do anything, I guess first of all, have they— do you know if they've started this effort to try to get that going?

And I guess that's my question.

That might be a question for the Commission, I suppose. Senator Bjorkman? Thank you, Chair Foster. The answer to your question is yes, that process has begun. My office has been investigating how to execute the legislative recommendations with the Real Estate Commission as well as the Board of Real Estate Appraisers, which both have recommendations in their audit for legislation that would, in the case of the appraisers, change our state laws to meet the Dodd-Frank federal law, as well as for the Real Estate Commission to make adjustments for the errors and omissions insurance, as well as chloroform the real estate recovery fund.

So those research projects are underway. A couple of them are much more detailed and difficult than had originally been envisioned. We're working with legislative legal to complete the drafting project on that, but that is a project for the next legislature. Which I would be thrilled to hand off to any willing legislature— legislator who would like to carry some excellent legislation on behalf of the realtors. Perfect.

Great. Thank you, Representative Pannon. Thank you, Co-Chair Foster. Mr. Lindell, on the question of the real estate recovery fund.

So that's a fund that the licensed real estate members paid into? So it's fees from the licensed individuals, is that correct? Mr. Lindell, through the chair to Representative Hannan, yes, that is correct. My understanding is they pay a $50 fee into that fund. And follow-up, Mr. Lindell, was somewhere in the neighborhood of $600,000 in that fund?

Mr. Lindell, through the chair to Representative Hannan, yes, $650,000. $40,000 Is the balance. And then one more follow-up. And as an auditor, would you have a recommendation on how that fund— if there is a regulatory change that says it's time for it to go away, um, would the recommendation likely be that we use it to offset fees for that commission for the next year on their license fees? Or is— because I, I always presume We don't really have— although I'm sure we legally can— take money that was paid for professional licensure and sweep it into the general fund, but that it should be used for the purpose that it was originally collected, and that's perfect— that professional protection element.

Is that something that the audit would recommend or has not recommended at this point on how to— in dissolving that fund, what we do with that money?

Mr. Lundahl. Through the chair to Representative Hannan, the audit does not make a recommendation specific to what would happen to the funds. All right. Thank you. Okay.

Further questions? Representative Galvin. Thank you. This is a question for the sponsor of the bill. What I heard several times with issues around filling seats And I don't see that you've touched on that.

It was really just make sure we get these on the life support or continuing their work at the different boards, and I appreciate that. Just wondered if you had done any thinking about it. Is it posted publicly what's available, what seats are open and what seats are getting filled when? I'm trying to better understand that process because it seems like in each of the audits there was mention of hangups for various reasons. Ms. Robb?

Thank you, Mr. Chair. Through the chair to Representative Galvin, so the seats on our professional licensing boards are filled by the Office of Boards and Commissions, which is in the Governor's office. They do maintain a website that reflects vacancies as well as has the current rosters for the board so you can see which seats are available. Okay, I'll leave it at that.

Thanks. Okay, seeing Representative Hannon. Thank you, Chair Foster. Ms. Rupp, can you give a follow-up on a couple that were specifically called out in audits? For instance, has the Board of Professional Counselors board seat that was vacant for 16 months, has that been filled?

Ms. Rupp. Through the chair to Representative Hannan.

I apologize. I don't know off the top of my head which seat was vacant. There is currently one vacant seat, and that's the public member seat on the Board of Professional Counselors. Okay. Can I ask a follow-up?

Which is the—. Representative Hannan. The Board of Marital and Family Therapy that the audit noted had been open for 32 months. Has that seat been filled?

Ms. Robb. Through the chair to Representative Hannan, forgive me again. I don't know off the top of my head. There is currently one vacant seat on that board and it is the public member seat. Okay.

And I believe there was one more, which is— Chair Foster, the Board of Social Work had a vacancy for 12 months. Ms. Robb. Through the chair to Representative Hannan, again, there is currently one vacant seat on the Board of Social Work Examiners. That is the seat for a baccalaureate social worker. Okay, so let me— can I ask a—.

Representative Hannon. So thank you, Chair Foster. So, Ms. Robb, when an audit for a board calls out as a problem in the audit that there is a board vacancy that is ongoing, where does it fall within the administration to try and escalate the compliance with completing that board so that the professional licensing board can work? Without problems meeting quorum and having those? Does it fall to the department in your division or is that purely on the Office of Boards and Commissions to note that an audit says there's a problem here and they need to recruit for it?

Ms. Raulston. Through the chair to Representative Hannan, the— you know, statutorily the authority to fill those board seats rests with the Office of Boards and Commissions. We work closely with them to ensure that, you know, I believe there are in excess of 400 boards that need seats filled. And so we work hard to ensure that the vacancies that we have, you know, stay clearly on their radar, as well as doing what we can to assist with trying to get the word out through our existing licensees that vacancies exist.

Okay. Can I ask one follow-up? And I guess this is sort of temperature and tone. So when, say— and I'm going to choose the Real Estate Commission because the audit has recommended the fewest number of years of renewal, 4 years, and that one of— there were several things there. But if it were a commission that the audit is spelling out, here are problems with your operation as a professional licensing board, does the department actively then engage with the licensees and say, we got to fill this, this is a problem that's cascading into all these other problems of why you can't get your licenses done and an active and a more aggressive timeline?

Or is it simply, well, if someone notices at boards and commissions— because there are over 400, but they're not all professional license ones. I mean, some of our boards and commissions have legal responsibilities to people who are paying fees to be governed and regulated. And if they're all treated exactly the same, then none of it has any importance. But I don't know if that falls within your division or if it's really a political— if, you know, nobody wants them regulated, then they just sit empty till someone notices the classified ad in the paper that no one reads that's never been printed, that there's a vacancy in their profession. But I don't—.

You know, now I'm creating a really dark scenario of how this Statutorily, it looks like it works fine. But if it's not working, I guess we need to know that more than an audit every 6 years. Ms. Robb. Through the chair to Representative Hannan, I think there is a— again, the responsibility to receive the applications for board seats, to review those, and then to select individuals to be appointed to those boards rests with the governor's office. I, you know, you also need individuals who are willing to fill those seats.

Many of the public seats on our boards have restrictions on who is eligible for those seats. You know, for many of the healthcare boards, the public seat can only be filled by somebody who doesn't have any financial stake in the healthcare industry. And so, somebody would be disqualified even for having, you know, a spouse who is a nurse. And so, it does make it more challenging to find individuals to fill those public member seats. So we are always doing what we can to try to get the word out, as I believe the Governor's Office of Boards and Commissions is as well.

Okay, thank you. Representative Chagi. Yeah, thank you, Co-Chair Foster. Director Robb, you mentioned that you also need qualified folks to apply to the board. I've actually in the last month heard from some constituents involved with various boards who have complained to me that they have had people that they know who are very well qualified, who have applied to various boards and been told by the administration that they are intentionally keeping a vacancy rate on some of these boards or otherwise refusing to appoint members who have— who are qualified and who are interested and willing to serve.

Is that an issue that you've heard? I guess the first question is, have you heard of qualified members applying and not being appointed? And can you speak to why? Would be part 2. Ms. Robb?

Through the Chair to Representative Schraggy, again, the appointment of our board members happens through the Governor's Office. We don't see those applications as they come in, and so I am unable to speak to your question.

Thank you. Do we have any further questions? Representative Bynum? Thank you, Co-Chair Foster. Through the Chair, Representative Bynum.

I'm looking here at the packet here and I'm just wondering if there's— if some of the negative— even though there's some negative comments in here or corrective actions necessary, my understanding is that there is a recommendation to extend all of these boards being presented. Is that correct? Ms. Rupp. Through the Chair to Representative Bynum, that is correct. Okay.

Follow-up? Representative Bynum. Thank you. Through the Chair, is there a reason why we as a committee and/or the legislature wouldn't want to extend these with that recommendation? Recommendation being given.

Ms. Robb? Through the chair to Representative Bynum, I wouldn't want to speak to the legislature's reasons for the actions it takes or chooses not to take. Follow-up? Representative Bynum? Okay.

If we didn't extend these boards, would there be a potential negative consequence to either the licensees or the purpose of which the boards are being organized and operated? If so, what? Ms. Raulston. Through the chair to Representative Bynum, yes, we very much appreciate our volunteer board members and the service that they provide. So the boards— and I think in many cases when people think about board service, they are envisioning, you know, 4 2-hour meetings a year.

Our boards meet typically for at least 1 day. Several have multiday meetings 4 times a year. But then there is additional work that must be handled every week as applications come in and investigations come up. And so we lean heavily on our, our board members, the expertise that they provide, as well as the volunteer service and hours that they are willing to donate to the state. So we appreciate them and would very much like to see all of these boards continue.

Representative Bynum. Being new here, this is my first term, I'm a freshman. Would it be considered standard practice that the legislature would run a bill to extend these boards in a routine manner yearly when they are set to expire and there is a recommendation to extend them? Ms. Rauh. Through the chair to Representative Bynum, there are extension bills every year as we have boards that are expiring every year.

So last year we had 4 boards expiring the year before that. I believe there were 2. It has been for professional licensing boards, of which there are 21. It has been since 1995 since a board was sunset. Representative Bynum.

Thank you, Co-Chair Foster. Through the Chair, last year we had a bill that came through the legislature that did exactly this. Were there any boards that expired last year because of a lack of extension? And if so, which one is—. Rob, through the chair to Representative Bynum.

So the Board of Registration for Architects, Engineers, and Land Surveyors did sunset on June 30th of last year. Statutorily, all of our boards contain a 1-year wind-down period in which the boards retain their full authority to operate. But at this point, that board will terminate on June 30th of this year. Representative Bynum. Thank you, Co-Chair Foster.

Through the chair, that board is scheduled for wind down, and yet I don't see it in this extension bill. Can you tell us a little bit about what the consequences of the board winding down and/or the loss of resources that we might have by not having an extension for ALS? Ms. Robb. Through the chair to Representative Bynum. So statutorily, in the case that a board is sunset, the duties revert to the department.

And so all of those professions would continue to require licensure. But the duties that are currently performed by the board, such as reviewing applications and approving those, especially in cases where someone may have experience or education that is somewhat out of the norm and the expertise that's offered by a member of that profession is useful. There are reviews of investigations that come up to determine, again, from the perspective of someone who is a member of that profession if a violation has occurred, and then the board, when it exists, weighs in on what the sanction should be, and then the maintenance of.

Regulations to ensure that we stay current as well as that we're following national standards are duties that the board provides. So in the absence of that, the department will need to contract with experts to provide that expertise. I do not have any architects, engineers, land surveyors, or landscape architects on my staff. Representative Bynum. Thank you, Co-Chair Foster.

Through the chair, is there any expectation of what that might cost us, or is it an unknown item at this time? Through the chair to Representative Bynum, as I say, we have not had a professional licensing board sunset since 1995, and that board was restored after its sunset. And so it is not something that any of our current staff have expertise with. I do know, you know, the going rate to hire an architect or engineer is not insubstantial. Thank you.

And then one final question. Representative Bynum. Thank you. Through the chair to Senator Bjorkman. This bill is in front of us now, and I don't see the sunset review— I'm sorry, I don't see the sunset review in the packet for AELS board.

That review was done through the audit control number 08-20141-24 on April 17, 2024, and there was a recommendation that said that their conclusions were from the review of that board that it served the public interest in an effective manner and that it was effective in all of its actions and made a recommendation for an 8-year extension to 2033. Is there a reason that we can have for the committee that that is not included in this bill as it is currently in the wind-down period? Senator Bjorkman. Thank you. Through the chair to Representative Bynum, that board extension is currently in another bill.

That passed the House and is matriculating through the process on the Senate side. The full legislature did pass the AELS board extension last year. However, that board extension was vetoed by the governor, and it's my understanding that that veto was encouraged likely by a member of the AELS board. Because that person did not like the deal that members of that board had struck with the interior designers about interior design scope of practice. The legislature in January had the opportunity to override that governor's veto and then extend the ALS board as well as implement the agreement that had been agreed upon by much of the board as well as the interior designers but there were not enough votes apparent in the legislature to be successful in overriding that veto and thus extend the AELS board.

Over the last 4 years, my office has undertaken the duty to run these board extension bills. It is not something that is a unique skill that I have. Any member of the legislature may introduce a bill to extend a board at any time. That is a process by which I'm happy to help any of you with. But there is an ALS board extension bill that is out there right now, and I think we should pass that bill.

Representative Bynum. Thank you, Co-Chair Foster, through the Chair, Senator Bjorkman. It is my understanding that is also a bill that is designed to change the construction of the board and also provide the extension, but it is not a standalone extension, and it does rely upon the underlying legislation to pass and extend the, uh, this board. And I know that last year we were here and we were having this conversation, and I was told the same response, and yet the board went into sunset. And so I'm just curious on what our backup plan might be in the event that that underlying the other bill that you're referencing might see the same fate as the prior bill and we actually go into a closure of this board.

Senator Bjorkman. Through the chair to Representative Bynum, as we take a look at options and choices available to us, I think that the legislative process can work And I think that it will work. And I am willing to respect people's choices in this legislative process. But what I really am not excited about doing is continuing to have to repeat over and over the work that we do in one year to the next because certain people in a minority position, they don't get all of their way. And then they waste a lot of legislative time because of that.

And I'm not interested in rewarding that type of activity. And so I will take decisive action to discourage that kind of activity when I can. And so that's what I'm prepared to do. Representative Bynum. Oh, thank you, Co-Chair Foster, for the the, the liberty to try to get to the bottom of what's going on with our Engineering and Architect Land Surveyors Board.

And I know that it represents over 6,000 members that are licensed. It's our fourth largest board. And so I appreciate the senator for giving us his responses. Thank you, Senator. Representative Moore, did you have a question?

No. Okay. Representative Hannon, question? They've been addressed. Okay, okay.

I think we don't have any further questions at this point. And so with that, we'll go ahead and set the bill aside, let folks kind of think about it a little bit. And so next up, what I would like to do is— I don't see Mr. Prestidge here. He's in the building. What I'd like to do is maybe see if we can locate him.

We're going to go into the Glenfarm gas line bill next. Couple things I need to do, figure out where the Glenfarm folks are, number one, but number two, find out when we need to be out of here by for the floor. I know that's at 4:30, but there might be caucus for folks. And so we will figure it out and we'll take a 5-minute at ease.

Okay, I'll call House Finance back to order. Let the record reflect that the time is currently 3:55 PM on Wednesday, May 13th, 2026. And, uh, the next bill, uh, that we have up is House Bill 381. It's the oil and gas property tax municipal tax bill. Just in terms of timing, as I understand it, floor session might be pushed back till about 5:00, so we may have some time.

The other thing I wanted to say is, um, over the next consecutive few days, uh, we do have the gas line scheduled every day at 1:30. I'm going to be moving the gas line up to the top of the list, and then all the other bills will come after that, and we'll probably try to set a time whether it's an hour and a half or longer or shorter depending on how many presentations we have for the gas line that day. But we'll try to allot an approximate time. We could go over, we could go under, but we do want to prioritize that bill. So with that, I'd like to pick off— pick up where we left off with regarding to Glenfarn in terms of just asking questions.

And once we finish that out, then we will go to the, I believe, Department of Revenues presentation. So with that, Mr. Adam Prestidge, if you'd like to come up. And also, let's see, I see Mr. Begich is not here. Is there anyone else you'd like to come up and join you? Have joined?

Not in person. I believe Mr. Frank Richards is on the line. Okay, so we do have Mr. Richards online. And in terms of questions, we'll go ahead and open it up. To the committee, and then as I mentioned, we will go to the DOR presentation.

So any questions? Do you want to start off with any comments, Mr. Prestidge? Yes, Chair Foster, Adam Prestidge. I was expecting that we were going to discuss some of our feedback, I guess, or views on the version T of the bill. Is that what you would like me to present on at all?

Perfect. We are moving along at such a blinding speed here. I am glad you reminded me. We did leave off with Mr. Zullo's presentation. Thank you very much.

That was a great presentation, Mr. Zullo, in terms of trying to figure out what the House Resources Committee did in taking the bill from the governor version to the resource version in the House. And so where we left off is Mr. Prestidge was going to maybe walk us through that presentation and just identify the areas where they had some concerns, and then we would kind of have all the different viewpoints on the table. So if you'd like to go ahead and start with that, that would be great. Thank you. You're very welcome.

This is Adam Prestidge, president of Glenfarm Alaska LNG. Thank you to the committee for hearing me again. What I want to recognize first is the significant amount of work that many people in the legislature put together, put into this version of the bill, particularly the members of the House Resources Commissioner Tschirras, the entire committee and their staff, numerous hearings, a lot of great dialogue and understanding shared. Where I will focus first and where what is most important to address is Section 16 where you have the actual value, numerical value of the alternative volumetric tax. I think that the presentation by Mr. Zullo yesterday was really helpful and instructive because there's a drafting error, and I'm gonna call it a drafting error, in version T of the bill that stacks the tax on top of each other 3 times, on top of itself 3 times.

And so the proposal that was in the governor's bill, the original version of the bill, was a throughput tax of 6 cents per MMCF of gas that goes through the pipeline. And because that number can scale all the way up from 200 million— 200 MMCF a day up to 3.5 billion units a day, 3.5 BCF, that number, that volumetric number was designed to capture taxation across the entire project. Including the growth of the scale of the project with the LNG export facility, the carbon capture facility. That's the design, I guess, or the simplicity of having one single AVT number. What the version T does is it assigns a volumetric tax of 15 cents to the pipeline, so it keeps the AVT that can scale up with the full size of the project, but then also adds to it the tax arrangement that would be individually negotiated with the North Slope Borough and with the Kenai Peninsula Borough.

And so the practical result of that is not one tax across the entire project, but a tax across the entire project in the form of the AVT plus an additional tax on the North Slope plus an additional tax on— from the Kenai Peninsula Borough. I actually don't think that was the intent of the House Resources bill, but that is the— because Mr. Zullo stated in the session yesterday that they set the 15 cents meant to reflect, I think it was a 3 mil tax rate. I may have to double-check that, but either way, regardless of intent, what we've ended up here is with 3 taxes stacked on top of each other in a way that economically does not work at all for the project. And so fundamentally, the core thing for this committee to address is, is making sure that if there is a volumetric tax, it is not stacking multiple tax regimes on top of each other. Okay, I'd like to recognize that we have in the audience with us Representative Elam.

Thank you for joining us. And we have a question from Representative Bynum. Thank you, Co-Chair Foster. To the Chair, I'm not exactly sure what to make of that intent conversation that we just had other than is it possible that we could get a communication from the Resources Committee to give us some clarification on that? I mean, I don't think they need to come and testify right now, but it is something I think we do need an answer on.

That I would like to know what the committee's actual intent was. And Mr. Zullo, while we're on this subject, if you wouldn't mind just clarifying, and then we'll go to questions from Representative Allard. Mr. Zullo.

Thank you, Co-Chair Foster. Through the Chair, Calvin Zulo, staff to Representative Freer on the House Resources Committee. I'm not sure that I read Section 16 of the bill in the same way, so I would perhaps recommend that the committee ask the drafting attorney, Emily Nauman, about that. Okay, thank you. And I think what we'll do is we'll set the issue aside for now, let Mr. Prestidge continue, and then we'll ask my staff to reach out to Ledge Legal and we'll get some clarification.

And while we're here, we have another question. Representative Bynum, do you have another? Okay. Representative Allard. Thank you, co-chair.

I'm wondering if we could get a copy of the minutes. I mean, I know we can all go watch the video, but don't they have minutes for that as well? For the meeting that in regards to what we were just discussing on the intent. Um, we could— there might be somebody who can find that particular discussion. I'm not sure what the protocol is on that, but I'm looking at my staff and he can coordinate.

Maybe I, I, uh, I'm not sure who we would ask for that, but we'll look into that. Thank you, Representative Ballard. Further questions? Okay, Mr. Prestidge. Thank you, Chair Foster.

Regardless of intent and how it is structured, the 15-cent volumetric tax is too high for the project. The Governor's bill proposed a 6-cent volumetric tax on the project. This more than doubles the tax burden that would be placed on the project from the Governor's bill. And so a key takeaway for this committee is a recognition of the project's position that that presents a real economic challenge for the project. So that is another point of, I guess, reaction to Version T. Okay.

I think this is probably an issue that we could spend a lot of time on. I am wondering, do you have many more points that you are going to raise? If so, then maybe we will just go ahead and tackle this. Otherwise— I do. You do have a number of things.

Okay. Let's go ahead and just jump into this then. Representative Gelvin. Thank you. And perhaps this will come up later as well, but I hope you can help us kind of think through our decision-making when we hear the governor first proposed the bill at 6 cents.

But I think it was 6 days ago I watched a press release. It was him speaking. Quite a bit about Gas Line and encouraging us to hurry up and get this done. And at that point, what I heard was, "It could be 10 cents." I mean, it was very vague. And so that is why I'm here to help better understand, and I'm sure you're going to help us by articulating why it needs to be 6 cents, and that's important.

And then I'm going to add to that since we're on dollars and cents, if you will, that for me, probably the most important thing I need to hear is what the estimated cost of gas is gonna be, especially to South Central, if only Phase 1 is completed. So, you know, help us think through all of these things because they all matter. And if you can drill in on that sixth sense so that we know why the governor has been, you know, flipping from one price to another, that would be helpful as well. Sure, sure. Mr. Prestidge.

Representative Galvin, through the Chair, Adam Prestidge. The 6 cents comes from basically a market survey that predates Glenfarnon's involvement in the project, looking at alternative, looking at other projects, some of which were discussed in session previously, and a view that having a tax that is similar to 2 mills or 2 mills equivalent puts the project in a more competitive and more commercially viable commercial standing, economic standing. And so everything that we've— so we've taken that into account in a lot of the way the project is designed, the assumptions that have gone into the project, the discussions with our financiers and our customers. Takes into account an assumption of a certain tax arrangement, which is that 6 cents, 2 mils equivalent. If that isn't the case, it puts a burden on the project that needs to be dealt with somewhere.

And so when our efforts— just to reiterate, our goal with the pipeline in particular is to deliver the lowest possible price gas to Alaskans as quickly as we can and as safely as we can. And so everything that we're doing here, talking about how we tax the project, is really with that intent in mind. How can we bring the cost of gas down for Alaskans? Not— and I'm aware of how it sounds to hear that from a private developer, but just to make it clear, We have total alignment on that. We want the project to work.

We want the project to be something that the Regulatory Commission of Alaska feels confident in approving. And so having a low-cost gas is an alignment between the developer, our lenders and investors, and Alaskan customers. And so when— anytime you push the gas— the tax higher, that is essentially a pass-through tax to the customers that are buying the gas. And so That's the critical part of how this tax is set up.

Representative Galvin. Thank you. And I'm not trying to be a complete pest, but I will offer a different perspective just so that you know how some Alaskans might be thinking. The one company that gives us information on oil, for example, the one company where we do get their profit information. We know that they are doing better up here than they are anywhere else in the world.

And they have to— that gets released in headlines and so forth. And so I hear what you're saying, that you're trying to make sure that the cost is low to us, but we also know that of course you're looking after investors or stockholders who want to reach a certain threshold of likelihood of, you know, risk and return. So I want to put that to you, that we also know that in Alaska, in some cases, the profitability here is very high, and it's our job sitting around this table to ensure that we get low prices to the people of Alaska in energy, but also that we get great jobs, great projects. You know, so we're trying to find that balance and that we get enough revenue to keep services strong here so that families want to be here. So there's all these things we're also juggling that— so when I hear this flatline, it has to be this price, period, I just want to make sure that you appreciate where we're coming from when we see the little glimpse we get into one company.

We know they're doing quite well. If you'd like to comment, feel free. Mr. Prestidge. Representative Galvin, through the Chair, Thank you very much for that comment. That's very, very important, and we absolutely recognize that.

That's part of the beauty, I'd say, in how this project is set up, because unlike any other company that's producing or selling gas in the state of Alaska, this project is currently partly owned by the state of Alaska. And so unlike any other private, private producer, the, the, the state of Alaska is a 25% owner of this project and a joint venture a joint venture partner to us. And so the entity that Glenfarn owns an equity interest in, 8 Star Alaska LNG, is 25% owned by the state of Alaska. We view the state as an integral partner in this project with us. That plays out by having the resources and the involvement of the state, of the government of the state of Alaska, including the Department of Revenue.

And so when the Department of Revenue is presenting their views and their analysis on the project to the committee, they're doing so not merely as kind of an outside perspective, but as actually being a part of ownership of the project. In terms of the transparency on the pricing, you also have protections from the Regulatory Commission of Alaska. And so we've talked a lot about the sales contract that we are in late-stage negotiations with, with Enstar, to sell the majority volume of the gas from the Phase 1 pipeline. Once that is signed, it will need to be approved by the Regulatory Commission of Alaska in a very transparent, thorough review process. And so we, we, we absolutely anticipate that this project and these contracts that we're setting up will be subject to that detailed level of scrutiny.

And we're prepared— we are prepared for that. Lastly, the state has the option to invest equity in this project. That will occur at FID once all of the projects are known and all of the contracts are finalized. And so we need to have have— we need to be engaging here with you on these discussions in good faith because we know that a short period of time from now, the state will have the option to look through all the financials of the project and decide if it is a worthwhile investment. And so quite frankly, I'm going to have to be back up here talking to you about why we priced things the way we did, and I want to do that.

I'm doing that now in good faith. Thank you, Co-Chair Foster. I'll reserve any other questions that I have at the moment for when we have DNR.

Before us. Thank you. Thank you. Okay. I'd like to also recognize that we have in the audience, audience co-chair of House Resources, Representative Dibert.

Thanks for being here. And also, we'll go to the question with Representative Stapp here, and then after that, we'll come back to the stacking question. And we do have alleged legal— Emily Nauman online. So with that, Representative Stapp, real quick. Yeah, Commissioner Foster, with your permission, the committee— could we get Mr. Prestidge's actual objections to the current version of the bill on the record?

Record first and then go back to questions so I can track and follow better through the chair. Actually, I think that's probably a good idea. I think we're going to start getting into the weeds, and if we can just all get that all out there for now, that's probably the best, best way forward. So Representative Bynum, we'll come back to you on this issue. And Mr. Prestidge.

Representative Hannon. Thank you. And thank you, Chair Vester. And when Mr. Prestidge is doing that, could you be real specific. I'm kind of a concrete learner.

So if you say on page 8, this section— so for instance, I've been trying to parcel out where you believe that there's a triple stacking of taxes, and I'm struggling to find it. But it's that kind of specificity, because if we are looking to make changes, we have to be that specific. We've got to go to line 4 on page 12 and make a change. So I need to know what you're saying is so I can understand it. —As you go through this.

And Mr. Prestidge, if you are willing and able in terms of just putting together like a short synopsis for us, that would be great also. But I will leave that up to you. And so if you would like to proceed with your presentation with regard to the items that you are concerned about with regard to the bill that came out of Resources. Thank you, Mr. Chairman.

Chair Fosse, just to give kind of a, just a roadmap, I guess there are maybe 2 or 3 kind of fundamental points that I'll comment on. And then there's maybe 3 or 4 kind of minor points that I think bear being brought up to the committee. But beyond that, we're largely supportive. And so I'll comment on both of those. The next, the next general concept is in Section 4 and Section 5.

And it has to do with municipalities and how they relate to this tax arrangement. The first issue in Section 4, and Section 4-AA, is that the municipalities under this arrangement have the right to elect whether to participate in this tax arrangement. Or to alter property taxes under a separate regime that would be negotiated by the municipalities. And that's where you get into the potential stacking of taxes because this election doesn't do anything to modify the existing AVT that applies to the whole project. And so Representative Hannan, to your point, there's no language in here that says that the taxes intentionally stack.

It is just kind of a feature of how it has been put together. The point that I want to make is that having an election by the municipalities to either opt into this tax arrangement or have a separate tax arrangement just perpetuates uncertainty on how this project will be taxed and set up. And so quite frankly, in real time, as our lenders and investors are evaluating this project, and trying to come up with whether it's a good thing to invest in the state of Alaska. They're trying to understand how is this project going to be taxed. And if we can't answer that question because 2 out of 2 major taxing authorities or 5, 5 taxing districts, all we have to wait for each of them to make a decision of how they're— whether they're going to participate in this or not.

That just perpetuates uncertainty and creates a real burden to finance the project. To say nothing of kind of the administrative burden of having to individually negotiate multiple tax arrangements. So I will continue. That is a key point. A somewhat related concept, and this has been discussed in yesterday's hearing, is in Section 5, and let me just take a moment.

That is Section 5. I will just— row 14. That basically says— I guess it starts at row 9. Line 9. If a municipality— a municipality can elect to instead of— a municipality can elect to take equity in exchange for issuing a tax reduction.

And so as we talked about in the session, I won't go into it too much, that doesn't work for an equity from a project development perspective. It takes real cash dollars to pay for the labor, the pipe, machinery to actually build the project. And so giving away equity for free just dilutes all the other equity investors and essentially ruins the economic model for the project.

A minor point— kind of minor point, but it looks major— is I will look at page 9, kind of all of page 9. There are two sections in here on the Fairbanks Spur Line. And what I'll say, as I've said before, is that we're very supportive of having a Fairbanks spur line. We're committed to that. That's the outcome of, I think, a very constructive dialogue with the Interior delegation and Mayor Hopkins.

Excuse me. Sorry. Where are we at in the bill? And I'm on page—. And just for the record, that's Representative Allard asking about where we were.

Mr. Prestidge, I'm trying to follow along too. Representative Ballard, Adam Preston, I'm referring to most of page 9. Okay. And I bring that up because the version T of the bill has 2 sections that require a Fairbank spur line with different conditions and different requirements. And so I think that needs to be clarified that there is, instead of having 2 different sections that outline what needs to happen and how the spur line needs to be set up, there should only be one.

Just so it's clear to everyone what the law is. We obviously, you know, we feel like we worked very collaboratively to come up with the latter language on this spur line, which begins— just a moment— I think it's page— on page 14 in Section 21. Section 21, page 14. So this is a clarification. There should be one section outlining what the spur line is.

Now we get into—. I have a quick question before we move on. Representative Moore. Yes, thank you, Co-Chair Foster. Just for the record, we are in version T of the CS, right?

Okay, thank you. Yes, please. Mr. Prestidge. Thank you, Co-Chair. Quite frankly, those are the largest points we have to raise in the bill.

If you will allow me, I will take just a moment longer. To touch on a couple smaller points. Um, there is a community impact fund that is outlined on— in Section 21, and I believe that is also page 14. Just a moment. Sorry, it's page 13.

Um, that just requires a little bit of, uh, drafting because in line 20 it says that each owner of property will deposit $40 million into a community impact fund. Again, to reiterate, the Community Impact Fund is a concept that we, the developer, proposed. We think it is a good measure.

But the language in line 20 requires that each owner of property, as we have talked about, will have multiple equity investors. So we just need to make clear through the drafting that there is only one Community Impact Fund, not one for every equity investor that comes into the project.

And pardon me for hopping around. I have kind of done this by order of priority. I next go to Section 16.

Page number 9. Okay. So through the co-chair, is there any possible way we can go in numerical order without flopping everywhere? Mr. Prestidge? I've got 2 more.

I've just got 2 more. So I guess they will inherently be numerical order from this point forward. Apologies. And thank you. And Representative Allard, I've asked also if he can maybe give us something in writing, a quick Easy one-page summary, preferably.

Mr. Prestidge, Section 16, page 10, line 17. We have a termination of status that says the AVT set forth in this, in this bill terminates if construction of commencement of construction has not begun by January 1st, 2032. What we propose is something we think is very standard for project development that would allow that termination date to be extended in the case of a force majeure event or something that occurs outside of the control of the developer, like a war or an epidemic or some type of natural disaster.

So I think that's fairly— a fairly standard thing to incorporate when there's a deadline like that on a project. And then last, the last point that I will bring up is in Section 27.

That is on the final page, page 15, and it has kind of an outside date of January 1st, 2056. We propose to put that to 2060 with our intended date of commercial operations being late 2029. The project is set up to have 30-year gas sales agreements to customers in Alaska, and the debt is set up, is intended to be set up as a 30-year debt, and so extending that 4 years would just tie that timeline with the majority of the major contracts in the project. Beyond that, I'll just take a moment. There are things that the House Resources Committee did that we're supportive of.

The inclusion of references to the funding for the Alaska Education Fund, the federal impact aid disparity. There is a royalty gas revenue diversion. There is— there are a number of other things that were features added to the bill that we are supportive of and frankly don't have any negative position on. So that summarizes our primary views on the bill. OK, I've got Representative Moore then Step.

Representative Moore. Yeah, thank you, Co-Chair Foster. I just want to verify, we did a lot of jumping around there. Was it— is it 7 items that you guys have an issue with? Mr. President, correct?

OK, thank you. OK, and Representative Step and then Bynum. I think, Co-Chair Foster, through the chair to Mr. President again, thanks for being here and thanks for giving us that summary. So I'm going to be a little blunt and a little rapid here for you, so. Back in December, I remember chatting with you folks.

We were talking about how— I guess actually back in September, you guys were talking about how you were looking to go to final investment decision by December. December became January, and we said we would have final investment decision in February. February became March, and it was definitely April, and today is obviously May. So I think the underlying premise of this discussion is, hey, if you were to get a variation of all these 7 objections that you have raised on the current resources version of the bill, when would you go to final investment decision on this project? Through the chair.

Mr. Prestidge. Rep. Sapp, through the chair, thank you very much for that question. What I want to highlight is the timeline that we have set has delivery, commercial deliveries of gas to Alaska at the end of 2029. That hasn't changed. And so I'd say kind of the development timeline and kind of the buffer period that we've created Yes, that's moved, but the overall timeline of starting construction and completing construction on the project hasn't changed.

So that's, that's the answer. Yeah, follow up, Mr. Co-Chair. Yeah, thank you, Co-Chair Foster, the Chair, Mr. Precious. Appreciate that answer.

Not to the question I asked, though, so I'm going to ask in a different way. Is the current version of the bill more or less likely to move you to final investment decision than a more appropriate version of the bill that would fix these 7 items. Through the Chair. Mr. Prestidge. Thank you, Representative Sapp.

Through the Chair, if version T of the bill were passed, it would cause a delay of FID. When we look at FID right now, that's something we anticipate in the coming months, certainly this year. Passing version T, particularly with the volumetric tax at 15 cents and the additional taxes to the additional boroughs on top of that, would certainly cause a delay that I could not articulate the length of. May I follow up, Mr. Co-Chair? Absence, yeah.

Yeah, I think, Co-Chair Foster, through the Chair to Mr. Prestwood, so this is kind of, let's say, red flag number 1, because you talked about final investment decision under the existing tax structure, which is arguably much worse than even the Senate Resources version or the House Resources version of the bill. So if we were to pass this bill as it is, I mean, other than the equity stakes from the municipality, it's substantially less tax tax burden at 15 cents volumetric than it is currently at 20 mills in statute. So my question is, again, like, if I were to give you everything you wanted in this bill, let's say the all 7 wish lists, right, what does that do to your timetable? Does it accelerate it? Does that delay that?

Because this whole thing rests upon us giving big certainty to Glenfarm in their investment decision. But I think we would be more likely to want to do that if you could tell us that, hey, we'll absolutely have a project. Otherwise we're doing a lot of work for not a lot of reason. Through the chair, Mr. Prestidge. Representative Sapp, if the committee were to pass the bill with the changes that I've described, we'd be able to maintain our timeline of achieving FID in the near future and completing the project by 2029.

Okay, thanks. Uh, just again, I wanted to reiterate that we do have Ms. Emily Nauman online. We had the stacking question, but I think it's been somewhat clarified in terms of it's not a literal stacking, it's more of a effective stacking, but we are going to go to Representative Bynum to see if you want to ask that or you might have another question. I did have a different question. Having a response to just verify what the intent of the Resources Committee would be, I would still like to hear that.

I think that is important. But my other question is, so we have talked about whether or not this bill gets passed out tomorrow or in 2 weeks or next month, you indicated that trying to get something that you can work with as soon as possible is better, obviously. But what is currently the critical— you know, what is the critical item in your path here for trying to meet that timeline you were talking about? Because it sounded like to me from your answers to Representative Stapp was that we are still working through this, but we are still going to make that timeline. So I'm wanting to know what is the other item in this critical path that, that's really going to determine whether or not we meet that final date that you were just referring to.

Mr. Prestidge. Representative Bynum, to answer your question of what else needs to come together— is that the right way of summarizing your question? Representative Bynum, for clarity, I just want to know what the next item in the critical path is. I mean, there's going to be lots of things that have to come come together. I mean, you need to get labor agreements, you are going to have to get contracts, you are going to have to get commitments.

I understand that. But you seem to indicate that there was this very firm date that you were going to be able to meet if we were able to get a bill out through this committee and through the legislature.

It just didn't seem like it was very firm that our timeframe was relying on the critical pathway of the bill. That there's other things that are actually probably more important. Maybe it's your construction season when that needs to begin and we have a timeframe that we can absorb here. I'm not sure. But could you clarify for us kind of what the critical pathway is for this bill and what's the next thing?

Mr. Prestidge. Representative Bynum, through the chair. There are other major pieces of the project that need to come together. That includes our customer agreement with NSTAR as well as other customers, but primarily with NSTAR, the regulatory commission approval of that contract, and then, of course, the agreements for all of the debt and equity financing on the project. Those are the other big gating items, big long lead time items that need to come together.

Having this tax arrangement in place sooner makes all of those things much more certain and easier to complete and close. And there is also certainly recognition that the legislature has a calendar to it as well. So there is certainly an urgency driven by the realities of the timing of the session. Thank you. Okay.

Did you want to call up— us to call up Mr. Zullo? I was just looking to see if we could get that the answer from the intent from the resources and the drafting of the bill. The co-chair of the committee is here.

And just for the record, that was Representative Hannan. Certainly welcome both the co-chair if you're interested. I know that Mr. Zullo had the presentation, but Representative Dibert, I think this might be a little bit of a surprise for you. You may not have expected that, but you're certainly welcome. Mr. Zullo, though, you're welcome up.

Thank you, Co-Chair Foster. Again, for the record, Calvin Zulo, staff to Representative Freer in the House Resources Committee. With regards to the intent on the municipal property taxes applied to the gas treatment plant and the LNG facility, the intent is not necessarily to apply those local mill rates to the project. Sections 4 and Section 5 both have exemptions. For AS2945 property taxes that allow the project developer to negotiate with the respective municipalities, the North Slope Borough and the Kenai Peninsula Borough, to lower that mill rate.

And again, it is only those two boroughs that would have municipal property taxes applied to the project. It would not be all five boroughs along the pipeline corridor. Representative Bynum.

I'll hold for now. I'll come back at it later. I just— I'm not sure that 100% answers the question on whether or not with the intent of the— you know, if that clears up the intent. Is there still confusion, I guess, from Glenfarm's perspective on whether or.

The bill is meeting the intent of what I just heard or not.

Mr. Prestidge? Representative Bynum, through the Chair, Adam Prestidge. Irrespective of intent, the practical impact of the way this is structured would stack each of these taxes on top of each other. Representative Bynum, any further? I'm okay for now.

Thank you very much, Mr. Zullo. And so next up I have Representative Galvin and then Hannan. Representative Galvin. Thank you. I'm still trying to zero in on one of your primary concerns, which is the volumetric tax at 6 cents.

And I think we agree that we both want to see the lowest price to to Alaskans in Phase 1, but I want to make mention that in Phase 2, things change, right? You're selling to markets and our interests diverge.

And we're looking to maximize revenue to Alaska, of course, but also while keeping the project attractive to, you know, your customers. And so we're on with you on Phase 1. But by phase 2, lowest price isn't always best because we need to protect the interests of our constituents. So I just want to keep that in mind that we do need information and we need to get to the appropriate tax amount to offset the impacts. And that is really why I think I want to be clear why I am asking for more information.

It's not because we want to pick at you or get to your private, you know, information that you have. This is the reason. And so, you know, how is that going to look, Phase 1, 15 versus 6? And that is also— I appreciate if we have a project, because if it's too much bigger, then it may not even be a project. And that's also important information for us to consider.

So I want to put that out there, and if you'd like to respond to it, I'm happy to hear your thoughts. Mr. Prestidge. Thank you, Representative Galvin, through the Chair. Adam Prestidge. I want to address a question you asked me earlier, which is on the gas pricing to consumers.

I made this point to the committee earlier. So long as the LNG facility FIDs anytime in the next 4 years before completion of construction of the pipeline, then gas delivered to Alaskans will be in the $5 range, $5, $6. And you'll have to allow me to just provide that as a range because it's still subject to negotiations. But I'm giving you kind of a ballpark. That is, that is the outcome that occurs if we FID the LNG export facility.

I'll come back to that. If we don't, if we don't FID the LNG export facility, then the cost of gas delivered on the pipeline under Phase 1 only I'd say would be in the mid-teens at a number that is competitive with existing contracts coming out of the Cook Inlet and existing, existing prices and forecast prices for LNG, for imported LNG, which would be the alternative. And so that's the structure of the gas pricing to consumers. The criticality of having an LNG project that works is the key to being, to being able to deliver that approximately $5 gas to Alaskans. That's a, that's a very competitive business.

Having been a developer of our Texas LNG project as well, I can tell you that the pricing of LNG competing in the market, that's a market that can turn on cents. 5 Cents here or there, 10 cents here or there. Customers make their decisions based on, on, on small margins. And so when it comes to Phase 2, keeping it a low tax is also critical to making sure that the project is competitive in the global market to sell to customers. I do believe that is something that Gaffney Klein has provided testimony to other committees about, and so I would suggest having that third-party validation as well.

Thank you. And they are on later. Gaffney Klein is supposed to be on later, but we will see if we get to that. Yeah. I have got Rep. Sinofannon and then Allard.

Rep. Sinofannon. Thank you, Co-Chair Foster. Is Emily Nauman online with us? Ms. Emily Nauman should be online. She was a little while ago.

Let me double-check here. And Ms. Emily Nauman, she is online. Okay. So thank you, Co-Chair Foster. Ms. Nauman, my question goes to one of the points that Mr. Prestidge raised of concerns in version T that the spur line references by being in two places in the bill might imply that there is more than one spur line and wanted clarification.

I know that statute writing looks very different than contract writing, and especially since the second reference is very far in the back of the bill under conditional effects. Can you tell me, in the drafting of the SPUR line, which is first referenced on page 8, continues on to— actually, no, it's page 9. The top of page 9, and then is again mentioned on page 14. Can you tell me whether there's any confusion in your mind as a legislative drafter that there could be interpreted to mean more than one spur line, or is it all very clear and the conditions of the Fairbanks-North Starboro spur line are consistent in the two locations in the bill? Miss Emily Nauman, can you put yourself on the record?

Sure. For the record, this is Emily Nauman, Legislative Legal Services. And perhaps the most helpful thing I could do is walk through those bill sections one by one. But the short answer to your question is, uh, as I read this bill and as, as I view it currently drafted, it refers to one spur line but two different requirements related to that spur line. So if we start with the bill on page 9, subsection B, this section requires that plans for the project include a spur line before the project is eligible for the AVT under 4359.

If we scroll down, we can see that spur line is defined on page 11, line 28. And this is important because both the section above it related to the plans before a project is eligible for AVP and the section below it— we'll discuss in a minute— the contingency section both rely on this same definition of spur line. And I think that is very clear intent that both sections are meant to refer to the same spur line but different qualifications related to the— both the enactment and application of AVP. So Again, top of the bill in the statutory sections, we're looking at a plan of development that must require a spur line before a project is eligible, eligible for AVT. And that's once this law that we're looking at becomes law.

In the lower section of the bill related to the spur line on page 14, what we're looking at here is a section that conditions the AVT springing into effect In other words, until the list of things starting in Section 21, starting on page 13, until these things happen, there will be no AVP law in the books. And one of the conditions of the AVP law springing into effect is that the Commissioner of Revenue has to determine that the person who is responsible for constructing a spur line has committed to construct the spur line. I, I would view this as a contract. I imagine that's the tool that the commissioner would employ to sort of tick this box on the list. So again, we can now work forwards or backwards— forwards chronologically and say there is no ABT on the books.

In order for the ABT to come into effect, the commissioner has to determine that the person responsible for constructing a spur line has committed to construct that spur line. At that time, the ABT, the law comes into being. And scrolling back up to the ABT section, in order for a project to be eligible for this ABT that's on the books, the project has to incur— include a spur line. And I hope that helps clarify the intent and my understanding. Thank you, uh, Co-Chair Foster.

Mr. Prestidge, does that assuage your concern about the multiple references to the spur line? Because hearing our attorney describe it, it makes sense to me why it is in multiple locations. But you raised it as a concern. So—. Mr. Prestidge.

Representative Mahan, through the Chair, yes, thank you. I actually find that to be quite a helpful clarification from Legislative Legal. Okay. And just so you know, that also puts it on the legislative record that that is our interpretation and intent by having our attorney who was the drafting attorney of version T put that there in her description, taking instructions from resourcing and explaining it to finance. Thank you.

So I'm hoping that that takes 1 of 7 points off your list of problems. Representative Ballard. I'll hold off. Representative Moore. Thank you, Chair Foster.

Back to the spur line conversation with it being in 2 different places in the bill. Those each have a requirement attached to them. Are you.

With both of those requirements. Mr. Prestidge. Representative, Representative Moore, through the chair, the answer is yes. Thank you. Okay.

And further questions for Mr. Prestidge before we go to the next presentation, which is from DOR? Anything you'd like to add, Mr. Prestidge?

Chair Fosdorff, thank you very much. Okay. We have a question. Representative Ballard. Back in.

So Representative Stapp had mentioned that if you get what you want and we all come to an agreement, are we going to go through with our project? I have to be honest, I didn't hear a solid answer from you. I want to know. Mr. Prestidge. Representative Ballard, through the chair, this is a fantastic project that I strongly believe will go forward and that having the tax arrangement in place is a necessary condition to doing so.

With that in place, it is a huge benefit to taking the project forward and quite frankly a true detriment and challenge to the project to take forward if this tax arrangement is not put in place. I can accept that answer. Okay, thank you. Take that. Okay, Representative Hannon.

Thank you, and I apologize, Mr.— Chair Foster and Mr. Prestidge, my notes are very scribbly in trying to keep up with your points, and so I have in here community impact fund, but I can't recollect what the concern was. Um, and again, while we have Ms. Nelmon there, um, I guess I want to try and tick off the ones that I think are very manageable for us to address of the 7 concerns before we get to ones that are more complex in how we address them. So, because I've heard you reference the community impact fund as something that Glen Farnsworth is okay with, but then I've heard that, you know, is that perhaps one of the things that you think is a stacked tax? So could you expand again on what the concern over the Community Impact Fund referenced in the bill is? Mr. Prestidge.

Representative, through the Chair, certainly. And again, just to reiterate, we are very supportive of the Community Impact Fund. We put it forward as a proposal. This is merely a drafting point, and I think it would be helpful to have legislative legal comment on. Line 20 says each owner of the property has committed to deposit $40 million into a community impact fund.

There will be—. Page. Sorry, page 13. Thank you. Section 21, line 20.

Each owner of property will deposit this amount of money into a fund. There will be multiple owners of the Alaska LNG Pipeline because we will have multiple equity investors. And so this would really refer to either the lead developer or the primary owner of the project so that we don't unintentionally create a scenario where, you know, every single equity investor has to put up $40 million in order to invest in the project. So— Representative Hannon? So could we ask Ms. Nowman, Co-Chair Foster, to address— because I gave back my statute books, but it has to be a property owner taxable under 4359.020.

That would be subject to $40 million into the Community Impact Fund. So if she could describe for us whether that could be every equity investor or if it— how statute 4359-020 narrows that. Ms. Nowlin. Sure. Again, for the record, this is Emily Nowlin, Legislative Legal Services.

I think that— through the chair to Representative Hannan— I think that her point is well taken, that this does seem to point to an owner of property taxable still under 4359.020, which is the ADT in the bill, for clarity. However, I think if there's any confusion, I don't see any issue with narrowing down this term owner of property. I think it would add clarity to the bill if that's the intent, to try to point to one individual owner or a primary owner or the person primarily responsible or some language like that. As a final sort of nuance, I just want to add that it's the Commissioner of Revenue that determines that these requirements are met. So there is some room for the commissioner to add his or her interpretation to this list before sort of notifying our advisor that this list of things has occurred for the law to spring into effect.

Representative Hannon. Thank you, Chair Foster. So, Ms. Nowman, as you drafted it, you did not interpret that 4359.020 would apply to every equity investor in the project. But only the operator who would be subject to the volumetric tax. Is that what I heard you say, Ms. Newman?

Through the chair, Chairwoman Hannan, that was how I envisioned it while I was drafting it. But again, I see no issue in making it more precise if that's the committee's will. Okay. Thank you so much. Thank you, co-chair.

Okay. Um, so I think what we're going to do is we're supposed to be on the floor in about 10 minutes. Rather than just try to dive into the 36-page PowerPoint from the Department of Revenue, which is, I think, going to be, uh, some technical information, uh, let's come back to this tomorrow. I know that we have 41 amendments on the floor for the capital budget. As well as some other items.

So I don't see us coming back until late tonight. So as I mentioned earlier, we are going to start moving all of the gas line hearings that we have to the top of each day's agenda so that we can prioritize this. So also be prepared for some later evenings. So with that, our next meeting is scheduled for tomorrow at 9:00 AM, and at that meeting we'll be taking public testimony for both House Bill 104, Address Confidentiality Program, as well as House Bill 195, Pharmacists' Prescription Authority. And if there's nothing else to come before the committee, we'll be adjourned at 4:48 PM.

Thank you.