State of Alaska

Department of Administration

Alaska Public Offices Commission

Alaska Department of Administration, Alaska Public Offices Commission

AO-03-03-LOB

Number: AO-03-03-LOB

Requested by: S. Jay Seymour, Senior Attorney
BP Exploration (Alaska) Inc.

Prepared by: Tammy Kempton
Juneau Branch Administrator

Date issued: September 2, 2003

Subject:  Application of Lobbying Laws to Stranded Gas Development Act Meetings

This letter responds to your August 26, 2003, request for an informal advisory opinion and August 29, 2003, request for a formal advisory opinion as to whether meetings with members of the Murkowski administration by BP Exploration Alaska (BPXA) employees would constitute lobbying activities. Specifically, you stated that the purpose of the meetings is to discuss the preparation of an application under the Stranded Gas Development Act. It is anticipated that after the application is prepared and approved, the focus of the meetings will be to discuss the commercialization of North Slope gas and agree on terms, with a resultant contract that will require legislative authorization prior to the governor’s execution of the contract.

Short Answer

Meetings with members of the Murkowski administration by BPXA employees to participate in negotiating and preparing an application and subsequent contract under the Stranded Gas Development Act would not constitute lobbying activities.

Law - Sec. 24.45.161.
Exemptions. (a) This chapter does not apply to
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(4) a person who appears before the legislature or either house, or standing, special, or interim committee, in response to an invitation issued under (c) of this section.

(b) Nothing in this chapter may be construed as prohibiting or affecting the rendering of professional services in drafting legislative measures or in advising clients and in rendering opinions as to the construction or effect of proposed or pending legislative or administrative action when these professional services are not otherwise connected with influencing or attempting to influence legislative or administrative action. Nor does anything in this chapter prevent members of the legislature from discussing with constituents the advisability of passing legislation then pending before, or proposed to be presented to, the legislature.

(c) Either house of the legislature by resolution, or both houses of the legislature by concurrent resolution, may invite a person to appear to speak before the legislature or either house with reference to any pending matter. A standing, special, or interim committee of either house of the legislature may, upon the concurrence of a majority of its members, extend an invitation to any person to appear before the committee to give information in regard to, or explain, any matter pending before the committee.

AS 24.45.171(1) (effective September 15, 2003):
"Administrative action" means the proposal, drafting, development, consideration, amendment, adoption, approval, promulgation, issuance, modification, rejection, or postponement by any state agency of any rule, regulation, order, decision, determination, or any other quasi-legislative or quasi-judicial action or proceeding whether or not governed by AS 44.62 (Administrative Procedure Act); “administrative action” does not include

(A) a proceeding or an action to determine the rights or duties of a person under existing statutes, regulation, or policies;

(B) the issuance, amendment, or revocation of a permit, license, or entitlement for use under existing statutes, regulations, or policies by the agency authorized to issue, amend, or revoke the permit, license, or entitlement for use;
AS 24.45.171(6)

"Influencing legislative or administrative action" means promoting, advocating, supporting, modifying, opposing, or delaying or seeking to do the same with respect to any legislative or administrative action by means including but not limited to the provision or use of information, statistics, studies, or analyses in written or oral form or format.
Sec. 43.82.010.

Purpose.
The purpose of this chapter is to

(1) encourage new investment to develop the state's stranded gas resources by authorizing establishment of fiscal terms related to that new investment without significantly altering tax and royalty methodologies and rates on existing oil and gas infrastructure and production;
(2) allow the fiscal terms applicable to a qualified sponsor or the members of a qualified sponsor group, with respect to a qualified project, to be tailored to the particular economic conditions of the project and to establish those fiscal terms in advance with as much certainty as the Constitution of the State of Alaska allows; and
(3) maximize the benefit to the people of the state of the development of the state's stranded gas resources.
Sec. 43.82.020.
Contracts for payments in lieu of other taxes and for royalty adjustments.

The commissioner may, under this chapter, negotiate terms for inclusion in a proposed contract with a qualified sponsor or qualified sponsor group providing for

(1) periodic payment in lieu of one or more taxes that otherwise would be imposed by the state or a municipality on the qualified sponsor or members of the qualified sponsor group as a consequence of the sponsor's or group's participation in an approved qualified project under this chapter; and

(2) certain adjustments regarding royalty under AS 43.82.220.

Sec. 43.82.120.
Applications.

(a) A qualified sponsor or qualified sponsor group may submit to the department an application for development of a contract under AS 43.82.020 evidencing that the requirements of AS 43.82.100 and 43.82.110 are met. The application must be submitted in the manner and form and contain the information required by the department.

Sec. 43.82.210.
Contract terms relating to payment in lieu of one or more taxes.

(a) If the commissioner approves an application and proposed project plan under AS 43.82.140, the commissioner may develop proposed terms for inclusion in a contract under AS 43.82.020 for periodic payment in lieu of one or more of the following taxes that otherwise would be imposed by the state or a municipality on the qualified sponsor or member of a qualified sponsor group as a consequence of participating in an approved qualified project:

(b) If the commissioner chooses to develop proposed terms under (a) of this section, the commissioner shall, if practicable and consistent with the long-term fiscal interests of the state, develop the terms in a manner that attempts to balance the following principles:

(1) the terms should, in conjunction with other factors such as cost reduction of the project, cost overrun risk reduction of the project, increased fiscal certainty, and successful marketing, improve the competitiveness of the approved qualified project in relation to other development efforts aimed at supplying the same market;

(2) the terms should accommodate the interests of the state, affected municipalities, and the project sponsors under a wide range of economic conditions, potential project structures, and marketing arrangements;

* * *

(5) the terms should allow the project sponsors to retain a share of the economic rent of the approved qualified project that is sufficient to compensate the sponsors for risks under a range of economic circumstances;

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(7) the method for calculating the periodic payment in lieu of certain taxes under the contract should be clear and unambiguous; and

(8) while cost calculations for the approved qualified project under the contract should be based on amounts that closely approximate actual costs, agreed-upon formulas reflecting reasonable economic assumptions should be used if possible to promote administrative certainty and efficiency.

(c) Except as provided in (b) of this section, the commissioner's discretion under this section in developing proposed terms for a contract under AS 43.82.020 is not limited to consideration of the economic rent of the approved qualified project.

Sec. 43.82.220.
Contract terms relating to royalty.

(a) Notwithstanding any contrary provisions of AS 38, the commissioner of natural resources, with the concurrence of the commissioner of revenue and the affected parties holding a state lease or unit agreement, may develop proposed terms for inclusion in a contract under AS 43.82.020 that modify the timing and notice provisions of the applicable oil and gas leases and unit agreements pertaining to the state's rights to receive its royalty on gas in kind or in value if

(1) the viability of the approved qualified project depends on long-term gas purchase and sale agreements;

(2) certainty over time regarding the quantity of royalty gas that the state may be taking in kind is needed to secure the long-term purchase and sale agreements;

(3) the specified period of the state's commitment to take its royalty share in value or in kind does not exceed the term of the purchase and sale agreements; and

(4) the modification does not impair the ability of the approved qualified project or the state to meet the reasonably foreseeable demand in this state for gas within economic proximity of the project during the term of the contract developed under AS 43.82.020 .

(b) Notwithstanding any contrary provisions of AS 38, the commissioner of natural resources, with the concurrence of the commissioner of revenue and the affected parties holding a state lease or unit agreement, may develop proposed terms for inclusion in a contract under AS 43.82.020 that establish a valuation method for the state's royalty share of the gas production from an approved qualified project.

Sec. 43.82.300.
Requests for information.

The commissioner of revenue or the commissioner of natural resources may request from an applicant information that the respective commissioner determines is necessary to perform the respective commissioner's responsibilities under AS 43.82.140 . If the application is approved under AS 43.82.140 , the respective commissioner shall require the successful applicant to provide financial, technical, and market information regarding the qualified project that the respective commissioner determines is necessary for the purpose of developing contract terms for the qualified project under AS 43.82.200 . If requested information is not provided, the commissioner of revenue may not continue to review the application under AS 43.82.140 or develop the contract under AS 43.82.200 - 43.82.270, as applicable.

Sec. 43.82.600.
Governing law.

If a provision of this chapter conflicts with another provision of state or municipal law, the provision of this chapter governs.

2 AAC 50.513.
AGENCY ENFORCEMENT OF ADMINISTRATIVE LOBBYING ACTIVITIES. For the purpose of enforcing AS 24.45.171 (1) and 2 AAC 50, reportable administrative lobbying does not include those attempts to influence

(1) a proceeding or action to determine the rights or duties of a person under existing laws, regulations, or policies;

(2) a proceeding involving the issuance, amendment, or revocation of a permit, license, or entitlement for use;
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(5) a proceeding at which an action is taken awarding a grant or contract;

(6) a proceeding or action involving the issuance of, or ensuring compliance with, a legal opinion; and

(7) a proceeding or action to establish or enforce the terms and conditions of a collective bargaining agreement.

2 AAC 50.545

(b) "Administrative action," as defined in AS 24.45.171(1), does not include normal inquiries of administrative agencies, or routine actions made necessary by law, or the actions of a person who limits his lobbying activities to appearances before any public proceeding of a regulatory or administrative agency which conducts proceedings in open public hearing for which public notice is given and which creates a record of all proceedings and provides access to the public records or transcripts and to all material which is submitted as part of the record.

Facts

BPXA employees are meeting with members of the Murkowski administration on a regular basis to discuss the preparation of an application under the Stranded Gas Development Act.

BPXA anticipates that its employees will meet with state officials for more than four hours in a 30-day period.

BPXA anticipates that an application will be prepared and approved, following which BPXA employees and the administration will meet to discuss the commercialization of North Slope gas and to agree on contract terms.

The contract will be subject to a public notice and comment period, followed by possible revisions based on those comments.

The final contract must be sent to the legislature by the governor with a request for authorization to execute the contract.


Analysis

In your letter you stated:

Thus, for the purposes of Alaska’s lobbying laws, we believe that the primary purpose of these meetings is to draft proposed legislation and/or regulations rather than lobbying for or against Bills or regulations that are available for public comment. We anticipate that at the end of this process, there will be substantial opportunity for public comment and the lobbying laws will apply at that time.

In the lobbying law, AS 24.45.121 sets out when a person is exempt from the requirements to register and report as a lobbyist. Subsection (1)(4) exempts “a person who appears before the legislature or either house, or standing, special, or interim committee, in response to an invitation issued under (c) of this section.” There is no corresponding exemption for persons meeting with executive branch officials in response to an invitation.

Subsection (b) states:

Nothing in this chapter may be constructed as prohibiting or affecting the rendering of professional services in drafting legislative measures or in advising clients and in rendering opinions as to the construction or effect of proposed or pending legislative or administrative action when these professional services are not otherwise connected with influencing or attempting to influence legislative or administrative action.

Staff interprets this section to apply to an individual who prepares and provides draft legislative measures and opinions to his or her employer or client. Staff does not and has never interpreted this section to apply to drafting legislation for or rendering opinions to public officials. Those types of activities constitute lobbying and require that the persons engaging in them register and report as lobbyists. The meetings your letter describes would be lobbying activities requiring BPXA employees to register, except for the provisions of the Stranded Gas Development Act.

The Stranded Gas Development Act, AS 43.82, intends that the commissioners of natural resources and revenue meet with the sponsors of the proposed project to prepare the application and to negotiate the terms of the contract. See, for example, AS 43.82.010(2) , .020, .120, .210, .220, and .300. Because of these provisions, it is staff’s opinion that BPXA employees attending the described meetings are not required to register as lobbyists regardless of how long the meetings take.

Once the application has been approved and a contract negotiated, the commissioner must give the public notice and establish a public comment period. BPXA employees will be able to provide public comment to the commissioner during that period without becoming subject to the lobbying law. See AS 24.45.171(1) “administrative action” which becomes effective September 15, 2003; and 2 AAC 50.513 and .545(b), which are currently in effect.

However, the lobbying law will apply to BPXA employees who discuss the application or the contract and its authorization with individual legislators. The law will also apply to BPXA employees who testify before legislative committees regarding the application, the contract, or its authorization, unless those employees have been invited to testify pursuant to AS 24.45.121(4) and (c). By the time this issue reaches the legislature, the provisions of AS 23.45.171(8) as amended by Sec. 4, ch. 115, SLA 2003, will probably be in effect. The amendment, effective September 15, 2003, provides that an employee whose job duties do not specifically include lobbying may lobby for forty hours before triggering the requirement to register. Thus, BPXA employees whose job duties do not specifically include lobbying, but who communicate with legislators in attempts to influence their action on the application or the contract, would be required to register as lobbyists once their activities reach the forty-hour limit.

Conclusion

In meeting with BPXA employees to prepare an application and negotiate a contract under the Stranded Gas Development Act, the public officials involved are not acting in a quasi-judicial or quasi-legislative framework, but are acting in a purely executive capacity. Additionally, AS 43.82 mandates such meetings between executive branch public officials and the project sponsors. Thus, BPXA employees attending those meetings are not subject to the lobbying law. However, meetings or other direct communications between the legislative branch and BPXA employees regarding the Stranded Gas Development Act application or contract, are lobbying activities and would subject BPXA employees to the lobbying law.

The Commission approved the advice in this letter by an affirmative vote of 5-0 on September 11, 2003. The advice in this opinion applies only to the specific activity for which the advice was requested.

A copy of the original letter requesting the above advisory opinion is available upon request at the Alaska Public Offices Commission. 907/276-4176.