The Joint Meeting of the Senate Committee on Finance and Assembly Committee on Ways and Means was called to order by Chairman William J. Raggio, at 8:00 a.m., on Monday, March 15, 1999, in Room 1214 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

SENATE COMMITTEE MEMBERS PRESENT:

Senator William J. Raggio, Chairman

Senator Raymond D. Rawson, Vice Chairman

Senator Lawrence E. Jacobsen

Senator William R. O’Donnell

Senator Joseph M. Neal, Jr.

Senator Bob Coffin

Senator Bernice Mathews

Mr. Morse Arberry Jr., Chairman

Ms. Jan Evans, Vice Chairman

Mr. Bob Beers

Mrs. Barbara Cegavske

Mrs. Vonne Chowning

Mrs. Marcia deBraga

Mr. Joe Dini

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. John Marvel

Mr. David Parks

Mr. Richard Perkins

ASSEMBLY MEMBERS ABSENT:

Mr. Bob Price (Excused)

GUEST LEGISLATORS PRESENT:

Senator Dina Titus, Clark County Senatorial District No. 7

STAFF MEMBERS PRESENT:

Judy Jacobs, Committee Secretary

OTHERS PRESENT:

Steve DuCharme, Chairman, State Gaming Control Board, was the first to testify on the budget. He reminded the committee that in January the board proposed continuation of the credentials payment program because it reduced the turnover rate being experienced by the board. He noted the Audit Division had gone from a turnover rate of 12 percent to 5 percent due to the credentials payment program.

Mr. DuCharme said the Gaming Control Board (GCB) employs six Electronic Laboratory Engineers, and currently those with an electrical engineering (EE) degree qualify for the program but those with computer science degrees do not qualify. He reported two of the six do not qualify for the payment, and the board would like to change the language to extend the program to those engineers with computer science degrees. He provided the committee with a written proposal (Exhibit C) and noted the proposal will not change the funding.

Mr. DuCharme recalled some discussion regarding the inability of the board to recruit a chief for the Electronic Services Division. He said a nationwide search was conducted to recruit someone to fill the position, but it was unsuccessful at the salary offered. He said a review of a national survey and classified salary figures indicates Nevada would be able to compete by offering a salary in the range of $82,000.

Senator Raggio inquired what salary the board recommends for the Audit Division Chief position and/or the Electronic Services Division Chief position, and what recommendations the board would make regarding the credentials pay plan. He asked whether the request includes extending the pay plan to others who are not presently included.

Mr. DuCharme attributed the inability to recruit an Electronic Services Division Chief to a salary offered below the going national rate. The salary offered was just over $75,000, and he felt a salary of $82,000 would attract a qualified applicant for the electronic services chief and the audit chief. He explained the audit chief currently supervises both divisions, and the individual, who has been with the division for 20 years, is extremely qualified to do so, although his expertise in electronic services is somewhat limited.

Mr. DuCharme suggested that in order to provide maximum protection for the state and the industry, the division should be headed by a qualified electronic services chief. He reiterated that would require the expenditure of approximately $82,000.

Senator Raggio asked whether both positions are needed. Mr. DuCharme replied they are. He explained there are new devices and modifications in the electronic laboratory, with 2,100 models introduced each year. He stated it slows down the industry, creating a problem for those who are anxious to get new products out in the field. He stated it impacts the ability of the industry to grow.

Senator Raggio repeated his request for a recommendation regarding the credential pay plan. Mr. DuCharme responded the board would like to increase it to include those engineers in the lab who do not have engineering degrees or any new engineers coming into the lab. He reiterated two of the six engineers fall under that category. The plan allows compensation up to an additional $5,000 per year, he said, but generally the compensation is less than that. He explained there is a fixed sum that is distributed to those who qualify, so the request does not ask for an increase in the amount, only for the authority to include those positions.

Senator Raggio asked how much is in the fund. Mr. DuCharme replied the fund presently has $177,500.

Mr. Marvel asked whether the pay plan has contributed to the turnover. Mr. DuCharme answered that since the Audit division is most affected by the credentials pay, and the rate of turnover has dropped significantly, the board believes that is a contributor in retaining experienced auditors.

Mr. Marvel asked who is absorbing engineers. Mr. DuCharme replied many are hired in the industry, since the individuals are trained in gaming regulations and the industry has an ongoing need for competent people. He stated the agency employees are dedicated but they have had a flat salary level for a long time. He said there are a number of people who have reached the maximum salary level.

Senator Raggio stated for the record that he is an officer and director of a gaming company and a licensee.

Senator Coffin said he has similar disclosures of gaming clients in his role as an insurance broker. He said one client is a slot route operator, and another is a small casino. Mr. Dini indicated he, too, is a licensee.

Donna Varin, Chief, Administration Division, State Gaming Control Board, reported the base budget includes funding for 338 unclassified positions and 91.5 classified positions, a total of 429.5 positions. She repeated the chairman’s comment that the audit chief position has been deleted from the budget.

Ms. Varin noted the requests for enhancements are minimal this year with a request for a Research Specialist position in concert with the economist used for research on revenue projects. She said the request is for a research specialist that would be designated to keep track of national and international gaming issues and develop a gaming research library, and to research, analyze, and report on those issues affecting Nevada. She added the position also would plan, organize, and facilitate meetings to gather public and expert testimony, draft position papers, and assist the division with special research studies.

Ms. Varin asserted all the questions posed during the past biennium regarding Native American gaming initiatives are an indication the state should pay attention to gaming in the future. She said the new position would be designated to track and study those issues.

Ms. Varin noted the maintenance module includes a request for four part-time Investigative Agents who will investigate applications for corporate officers, directors and key employees. She explained the applications for licenses for those positions have not received the attention warranted, and the board has chosen to employ four part-time investigators because of the flexibility it provides.

Ms. Varin said the board will be able to employ well-trained investigators who may have retired from other law enforcement agencies to utilize their expertise. She added they will provide support to the investigative agents and reduce the cost to the state since they will not be provided with annual leave or benefits. Ms. Varin noted the cost for those positions in Fiscal Year (FY) 2000 will be $85,849, and the commission will receive $52,000 in revenues, leaving a net General Fund expenditure in FY 2000 of $33,000.

Senator Raggio asked whether the additional group of part-time investigators will be sufficient to handle the workload with all of the new applications and properties coming on-line. Mr. DuCharme responded the board attempts to process the time-sensitive applications expeditiously, while licensees who are key personnel already on the property are not attended to as fast since their licensing is not mandatory. He explained the request is being made to enable the board to catch up in that area by employing retired law enforcement people who are already trained. He suggested any improvement will be better than the current situation and the board believes the request will provide adequate personnel.

Senator Neal asked for clarification regarding the part-time individuals. Mr. DuCharme clarified they would be people who have retired in the state of Nevada from the Public Employees Retirement System (PERS), and if they are employed for 19.5 hours or less each week their retirement benefits will not be affected. He noted there are several retirees with law enforcement or government experience who could be employed without the necessity of being trained. He named the Henderson and Reno Police Departments and the Metropolitan Police Department of Las Vegas (Metro) as examples of agencies for whom those retirees may have worked.

Senator Neal asked what restrictions would be placed on those individuals. Mr. DuCharme replied they will be subject to the same restraints and obligations as full-time agents, since they will be the same as any other employee except they will work no more than 19.5 hours a week.

Mr. Marvel asked how much backlog there is. Mr. DuCharme responded, "It depends on the complexity of the application." He was unsure how many applications are still awaiting completion.

Senator Raggio asked whether the question could be answered regarding how many establishments are awaiting licensing. Mr. DuCharme explained that a small application on a restricted location may require 3 to 6 months to process, whereas a larger application could take 6 months to 2 years, depending upon whether there is foreign travel involved, or upon the structure of the enterprise.

Ms. Varin continued, saying the maintenance module M-300 contains a request for $9,600 to maintain software and hardware for the Carson City security system. She explained it pays for the maintenance contract for an intrusion access control and video monitoring system.

Senator Raggio asked how much is in the forfeiture account and from what it is derived. Michael J. Colburn, Deputy Chief, Administration Division, State Gaming Control Board, replied the funds come from criminal case seizures by the Enforcement Division, and the money depends upon whether funds are seized under state or federal statutes. He noted those funds are expended for law enforcement only if the money is obtained as a result of federal statutes. He said there is $340,000 in the federal forfeiture account.

Mr. Colburn explained the fund was established as a reserve and it is necessary to go before the Interim Finance Committee (IFC) for spending authority. He added there are several projects under consideration that will be financed by those funds. He explained funds in budget account 101-4065 are essentially a state forfeiture fund to establish a network linking State Gaming Control Board activities statewide.

Dennis K. Neilander, Board Member, State Gaming Control Board, reported the original proposal included the network as part of the base budget, but since that is not possible alternatives were considered. He said one alternative was to use the forfeiture funds to establish the software for the network, and the board is seeking the best way to fund its operating expenses since the forfeiture funds cannot be used for ongoing expenses.

Senator Raggio asked whether the network should be authorized in the budget. Mark Stevens, Assembly Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, responded forfeiture accounts are normally not included within The Executive Budget, so a plan is usually developed to seek authority from IFC.

Mr. Neilander noted that during the past 3 months gaming win (revenue) has risen slightly, with an even greater rise in the last month. He said collections have been up significantly. He pointed out the collection rate fluctuates a great deal, because at any given time most major properties have extended a lot of credit which is outstanding.

According to Mr. Neilander, the win remained relatively flat through the last fiscal year with an upturn during the last 3 months. He called the last win figures encouraging, although he acknowledged there were unusual events that helped the last rise, such as a major boxing match. He opined the opening of the Bellagio resort created a new market to some degree and did not have quite the "cannibalistic" effect that characterizes some new properties.

Senator Raggio asked where cost of operation of the gaming commission is reflected in the budget. Mr. Stevens pointed out the salary amount is included within the Personnel category and the travel expenses for the commission are included in the Out-of-State Travel category, just as operating expenses are included in the Operating Expenses category for the entire base budget.

Senator Raggio asked whether the salaries were included as part of the $23.7 million for personnel in the base budget. Mr. Stevens recollected $215,000 each year is built into the base budget for members of the commission and the Gaming Control Board. He said support costs are also included in the base budget.

Senator Raggio noted out-of-state travel shows only $6,000, and he surmised that would not include investigations. Mr. Stevens confirmed that it does not. The $6,000 provides expenses for all personnel of the Gaming Control Board and the Nevada Gaming Commission. Senator Raggio noted some of those people have paid for their own travel in the past. Mr. DuCharme responded some board and commission members have paid for their own travel expenses when they have attended out-of-state and out-of-country conferences, but some expenses are reimbursed by the state for attendance at meetings in Washington, D.C.

Senator Raggio pointed out $6,000 would not pay for many of those expenses. He recalled some gaming commission members came before the Legislature last session and indicated they could not draw travel funds for international travel. Mr. DuCharme stated that is correct, and the same applies to board members.

Senator Raggio asserted the members should not have to pay those expenses out of pocket, and he suggested that Mr. DuCharme should confer with the commission chairman to determine how much would be a responsible amount to pay for at least one trip of that kind. He requested that an estimate of cost and a list of who should be included be provided to the legislators. The senator noted the expenses should not be paid by licensees.

Mr. Marvel recalled the same problem applies to the Nevada Athletic Commission expenses wherein members have had to pay their own travel expenses.

Senator Neal inquired whether the Gaming Control Board feels it has adequate funding to "do the necessary job to keep this industry clean." Mr. DuCharme answered, "Yes, we do."

Senator Jacobsen wondered what is happening at the federal level, and what the future may hold regarding the federal interest in gaming. Mr. DuCharme responded the National Gaming Impact Study Committee is meeting to draw up a final report due in July. He noted there are one or two areas in which the committee has consensus, such as a recommendation for federal regulation of Internet wagering or a complete ban of Internet wagering. Mr. DuCharme noted there is disharmony among national committee members regarding the issue of tribal gaming and whether there should be any federal intervention or regulation.

Senator Neal inquired whether Bobby K. Siller is a member of the State Gaming Control Board. Mr. DuCharme told him Mr. Siller became a member on January 3.

Gaming Control Board Investigative Fund – Budget Page GAMING-8 (Volume 2)

Budget Account 244-4063

Ms. Varin reported budget account 244-4063 was created to pay expenses for investigating applicants, and the account receives collections for those investigations. She stated there are two changes being requested. One requests an increase in revenues by $613,198 in FY 2000, and by $700,948 in FY 2001. She explained those sums will be divided two ways, one to increase the spending authority for travel expenses by $560,548, providing the ability to have $2,100,000 to conduct investigations. She noted those costs are paid directly by applicants.

Ms. Varin said the other requested change anticipates $52,650 in revenue from the four part-time investigators, and revenue in the amount of $140,406 is anticipated in FY 2001.

Senator Raggio asked why $2,000 is kept in reserve as indicated in the budget. Ms. Varin replied that is a requirement set forth in the statutes.

Senator Raggio called a short recess while awaiting the arrival of representatives from the Nevada Test Site for a special presentation. When the meeting resumed, Senator Raggio observed, "For almost 50 years the Nevada Test Site has served the country as an extraordinary natural resource."

Gerry Johnson, Manager, Nevada Operations Office, Nevada Test Site, U.S. Department of Energy, briefed the committee members on the test site. He reviewed the history and current status of the test site and spoke to its future.

John T. Mitchell, General Manager, Bechtel Nevada, explained Bechtel Nevada is actually three corporations, Johnson Controls Nevdada, Inc. (a large defense and public energy contractor), Lockheed Martin Nevada Technologies, Inc. (an aerospace contractor), and Bechtel Nevada Corporation. He described the long Bechtel involvement in Nevada, including Boulder Dam, mining and infrastructure jobs throughout the state.

Troy Wade, Chairman, Nevada Alliance for Defense, Energy and Business, explained his organization is composed of contractors and suppliers who do business at the test site and who joined together to seek future uses for the test site. He said he first went to work at the site in 1958, and this was his first opportunity to brief the legislative committees.

Mr. Johnson provided a brochure promoting the test site. He stated the site consists of 1,350 square miles surrounded by the Nellis Air Force Base bombing range. The two combined are approximately 6,000 square miles. He reported offices for the test site are located in North Las Vegas, and there is a small operation at Nellis Air Force Base for the remote-sensing laboratory.

Mr. Johnson explained that if there is ever a nuclear emergency in the country or the world, the test site has the ability to respond within 4 hours with technical resources. Emergencies could include damaged nuclear weapons, terrorist threats, or stolen materials. Mr. Johnson said the test site has aircraft, personnel, logistics equipment, and communications gear that are ready to be used at a moment’s notice.

Mr. Johnson indicated a similar operation is set up at the Andrews Air Force Base in Washington, D.C. to respond to any incident on the East Coast.

Mr. Johnson reported that in the early 1950s atmospheric testing was carried out at the site. Approximately 100 atmospheric tests were carried out, and in 1962 all nuclear testing went underground. Those tests continued until 1992. There were approximately 800 underground nuclear tests.

Mr. Johnson added that in the early 1960s the site became home to a nuclear rocket development program started by President Kennedy. He explained the object was to develop a nuclear propulsion system for deep space exploration. That program was discontinued in the mid-1960s, although those facilities have been maintained.

Mr. Johnson related the country went into a self-imposed moratorium on nuclear testing in 1992. He displayed a chart on a screen representing Bechtel Nevada manpower performing underground testing at the Nevada Test Site in the 1980s with a budget of approximately $1 billion a year. He said the Bechtel workforce included around 7,800 contract employees, and with the addition of other employees there were nearly 12,000 people working at the site.

Mr. Johnson noted the contract workforce dropped to a low of 2,200 in FY 1997 and now it has grown to 2,400. He asserted that is significant for Nevada because once the Department of Energy starts downsizing a site, it continues until closure. He noted the increase in the workforce has allowed Bechtel Nevada to hire some highly technical people, which not only enhances the work but also lays a sound foundation for future opportunities for the state.

Mr. Johnson drew attention to two charts on funding. One depicted the total Department of Energy operation at the Nevada Test Site, supervised by Mr. Johnson, and the other depicted the workforce at Yucca Mountain. He said the Department of Energy provided $657 million of direct funding for operations of which $247 million was spent on defense programs. Approximately $90 million will be spent in 1999 on environmental restoration, including $45 million for environmental cleanup from the underground testing days and $40 million for storage of low-level radioactive waste.

According to Mr. Johnson, the only radioactive waste brought in to the test site is from other Department of Energy sites and a little bit of specialized waste from the Department of Defense. No commercial waste is brought into the test site. He said the Department of Defense performs highly classified work at the test site, at a cost of approximately $31 million, for intelligence organizations because of the unique nature of the site available.

Mr. Johnson said the test site is home to a renewable energy program costing $24.5 million. It involves research into alternative ways to generate electricity using such methods as solar power or hydrogen power.

Mr. Johnson reported a $16.5 million cooperative agreement was reached with the University and Community College System of Nevada (UCCSN) for some "very cutting-edge technology" and experimental work. Of the $16.5 million, $6.1 million will go to UCCSN and the Desert Research Institute (DRI), and the Department of Energy is trying to get the universities involved with defense work at Los Alamos National Laboratory, Lawrence Livermore National Laboratory, and Sandia National Laboratory.

Mr. Johnson said state regulatory agencies receive $3.9 million worth of grants for environmental protection, for regulatory compliance, for emergency management and planning, and for health, and DRI receives $6.5 million in contracts. He said the department has had a 30-year relationship with DRI for environmental work at the test site and for archeological studies. He added the department is in the process of entering a $657 million contract with the University of Nevada, Las Vegas (UNLV) to make an analysis of the economic impact analysis on Nevada.

Mr. Johnson said the Los Alamos National Laboratory, Lawrence Livermore National Laboratory, and the Nevada Test Site have been working in partnership to try to find out how underground nuclear testing can be replaced and how to determine whether the nuclear stockpile is safe and reliable. He drew attention to a chart showing "subcritical experiments" involving explosives and plutonium, which are performed 1,000 feet underground. He indicated one of the key industries used by the department and which is very traditional in Nevada is mining.

Mr. Johnson showed photographs of heavy construction underground with a setup for very sophisticated physics experiments. He said each subcritical experiment costs about $30 million, and the department has conducted six in the last 2 years. He indicated the department plans to do three to four every year for the foreseeable future. He said the experiments are conducted by Lawrence Livermore National Laboratory and Los Alamos National Laboratory. He explained scientists are brought in with equipment such as lasers to perform very sophisticated analyses of detonations of high explosives.

Mr. Johnson stated the department measures the results after explosives are detonated, and it would really like to take pictures of the explosives as they detonate. He pointed to the photo of a flash X-ray piece of equipment that was built in the United States and then given to the French, who used it for a number of years in their nuclear weapons program. He said the French gave it back and it is now being set up at the Nevada Test Site to be used by the department and Sandia National Laboratories. He noted Sandia also has partnered with UNR on flash X-ray technology and now is working on some very high-tech, high-physics work.

Pointing to another slide, Mr. Johnson reported it is the newest experimental facility and is called the "gas gun." He explained it utilizes shock physics, and the picture depicts one at Livermore that is very similar to the one being set up at the Nevada Test Site. He explained it allows for a study of plutonium.

Mr. Johnson asserted the technology is fairly simple, like firing a rifle. He explained that a tube with hydrogen gas is built and then an explosive is set off at one end. It compresses the gas, which creates huge pressures and ruptures a disk and then fires a projectile down the barrel. He said the facility pictured will cost about $20 million, and it is very significant since it is the first new experimental tool that has been built at the Nevada Test Site since 1992 when underground testing stopped. He declared, "We’re working with UNLV to set up a whole new department in shock physics. [These are] cutting-edge physics experiments."

Mr. Johnson pointed to a picture of a facility at Livermore called the Nova Laser Technologies where the Department of Energy is building a national ignition facility. He stated the physics facility will cost $1 billion. He noted the instruments pictured are high-pressure and high-temperature lasers pointing at a very small target. He said the department is trying to simulate fusion, and part of the diagnostic work there is performed by Bechtel Nevada.

Mr. Johnson stated that his vision for the Nevada Test Site is to build an advanced experimental facility for a chamber where the laser would be used to actually create a small fusion reaction. He said it would generate flash X-rays and would be one of the most advanced physics facilities in the world. The facility would be the size of three football fields. Mr. Johnson predicted the facility would be ready sometime between the years 2005 and 2010. He indicated it would be used not only for the national defense program to study nuclear weapons, but also for universities from around the country to use to perform very high-tech, high-physics experiments.

Mr. Johnson estimated such a facility would cost from $500 million to $1 billion. He acknowledged it has not been budgeted but noted the national labs are seeking more and more sophisticated ways to try to understand how nuclear weapons work. He asserted the facility would be on a par with the national initiative facility at Livermore.

Mr. Johnson said Bechtel Nevada has been asked to develop a 30-year plan for the test site. He noted experimental work being done today is scattered around 1,350 square miles. He reported the Department of Energy would like to build a brand new experimental complex with all its equipment and facilities in one location.

Mr. Johnson referred to a picture of the department’s $100 million device-assembly facility. He said it was designed in the 1980s to assemble nuclear test devices used for underground testing, and it is probably the most modern nuclear facility the Department of Energy owns. It was designed for safety and security reasons and incorporates the latest in technologies. He said the department proposed the use of this facility for the future.

Mr. Johnson offered his belief that there will be closer relationships with Russia as the Russians try to disarm and dismantle their nuclear weapons. He asserted there will be a strong push for nonproliferation and for working together in what he called "transparency." He reported the department proposed this facility for use in setting up the necessary protocols because it is likely the most modern in the world. He stated there is a future potential for Russian nationals working at site, and then, in turn, U.S. scientists being sent into Russia.

Mr. Johnson described a "spill-control" facility at the Nevada Test Site built by the petroleum and chemical industries in the 1980s and used to study how to control and decontaminate large volumes of toxic materials. He stated it is the only type of facility in the country that has an environmental permit to release large volumes of chemicals.

Mr. Johnson referrered to a photo of a facility used by AMOCO and Allied Chemical in 1986. Although the facility has minimal use today, he noted it has a control room that can be used to discharge chemicals, and to train first responders and test their equipment. First responders are firefighters, police officers, security personnel, and medical personnel who are trained to respond to chemical and biological hazards, Mr. Johnson explained. He cited the danger from weapons of mass destruction and the possibility of terrorist threats as reason enough to keep the facility viable.

Mr. Johnson reported a major exercise was held at the Nevada Test Site 3 months previously with the participation of first responders from around the state, the FBI, and Nellis Air Force Base personnel. He said it was the first major exercise of the kind in the country to train first responders how to respond to a chemical, biological or nuclear incident. The exercise included firefighters were Las Vegas, Reno and all of the counties. Mr. Johnson described the scenario used in the exercise. He stated the exercise was so successful that the Department of Energy is working with the Department of Justice to set up similar training for the whole country with the assistance of universities in Texas, Louisianna, and New Mexico. He asserted the Nevada Test Site can play a very unique role in the training.

Mr. Johnson drew attention to a 1960s photo of a facility for the nuclear rocket development program which now is defunct. He said a proposal has been made to the Department of Justice to use the facility, which he characterized as a small city, as a center for training against terrorism. Trainees would be responsible only for their transportation into Las Vegas, and the department would transfer them to the Nevada Test Site where they would be housed and trained.

Mr. Johnson asserted one of the most pressing national security problems is that many of the third-world countries have buried their sensitive facilities deep underground. Because much of the work at the Nevada Test Site is underground, it was a natural step to actually mine tunnels. Mr. Johnson showed a picture of a hardened tunnel mined for the Department of Defense and now being used by new weapons sytems to test the ability to find deeply buried targets.

Mr. Johnson reported there are two programs that have the potential for huge impacts upon Nevada involving Kissler Aerospace and Venture Star. He explained the department has an agreement with Kissler Aerospace for that company to set up a spaceport at the Nevada Test Site to develop a two-stage rocket that would launch satellites into orbit and then recover rockets that would come back to the test site with parachutes. Kissler Aerospace believes each launch would cost between $15 million and $17 million, which is about 50 percent of what it costs today to launch satellites into orbit because the rockets would be reusable.

Mr. Johnson said Kissler Aerospace is in the process of working with the Federal Aviation Administration (FAA) to obtain a license. He clarified the FAA can authorize launching rockets into space but does not have the authority to license recovery. He said Kissler Aerospace is planning to go to Australia to do its initial launches in the early part of the year 2000.

Mr. Johnson said the second program, Venture Star, is a joint effort between the National Aeronautics and Space Administration (NASA) and Lockheed Martin. He said the Venture Star rocket has the potential to be a replacement for the shuttle to service the international space station. The rocket is being developed by Lockheed Martin at the "Skunk Works" and will be tested through 10 or 15 launches out of Edwards Air Force Base in the latter part of 1999 or the early part of 2000.

Mr. Johnson said 18 states were given the opportunity to submit qualifications packages. He said one was submitted for Nevada in conjunction with the Nevada Test Site Development Corporation, the Nevada Alliance, and Bechtel Nevada. He expressed confidence Nevada stands a good chance to become one of two sites to be selected by NASA for the final program. He asserted Paiute Mesa, with an elevation of 5,600 feet, will provide the first mile "free" for launching into orbit which NASA estimates could save between $200 million and $250 million a year in operating costs.

Mr. Johnson opined the Nevada Test Site will be very competitive as a spaceport, and if in fact either the Kissler Aerospace or Venture Star come about there could be huge dramatic economic impacts for Nevada. He pointed out any of those would bring in high-tech, spinoff industries which would allow the state to diversify its entire economy. Mr. Johnson voiced optimism over the prospect of joining forces with the aerospace industry, national laboratories, and the Nevada university system in pursuing technological advances at the test site.

Senator Raggio commended Mr. Johnson for an interesting presentation and asked when final decisions can be expected with reference to either Venture Star or Kissler Aerospace. Mr. Johnson replied he should know much more about Kissler Aerospace in the latter part of 2000.

John T. Mitchell, General Manager, Bechtel Nevada, interjected Lockheed Martin will probably make a decision in the beginning of the year 2001 as to whether it is going to go ahead and at the same time make some siting decisions. Regarding Kissler Aerospace, he said the Nevada Test Site is the only U.S. launch site the firm has chosen; it is a matter of whether the United States is selected.

Senator Rawson inquired whether any "Star Wars" research is going on. Mr. Johnson replied no development related to Star Wars is going on and the primary efforts at Nevada Test Site are to ensure that the nuclear weapons stockpile will continue to be safe and reliable.

Senator Rawson asked whether fusion research for the gas gun is being conducted. Mr. Johnson answered that a study of the properties of plutonium is being done by compressing plutonium using high explosives. He added:

Senator Rawson asked whether rail guns are being studied. Mr. Mitchell responded he was unaware of any active programs regarding rail gun or beam programs. Senator Rawson indicated he is interested in attracting new programs to Nevada. He pointed out the state pursued the supercollider project and asked whether the Legislature should be making some effort to attract such projects.

Troy Wade, Nevada Alliance for Defense, Energy and Business, responded that the test site will have to compete against 17 other states for the Venture Star launch base. He likened it to a version of the superconducting supercollider and added, "In the final analysis the award will be made to the state that can present the best economic and technical package to Lockheed Martin, because this is, in fact, a private venture rather than a government venture as was the superconductor." He reported the matter has been discussed with Governor Guinn and other members of the Nevada Legislature because competition for Venture Star will require the support of the state.

Mr. Wade added there will be some political spin attached to the decision because it is a billion-dollar enterprise, but the decision is ultimately up to the chairman of Lockheed Martin based on an economic package. Mr. Wade opined Nevada stands a good chance of winning the venture.

Senator Rawson requested that legislators be informed of what is needed to get involved, especially since the Legislature meets only every other year. Mr. Wade responded the next major step will come about sometime in April or May when there will be a meeting of Lockheed Martin officials and officials from the state. He declared, "It is our intent to keep this body and the Governor informed and involved and ask you to participate in that meeting."

Senator Jacobsen recalled that in previous years members of the Legislature were invited to tour the facility. Mr. Johnson offered to set up a tour of the test site at any time.

Mrs. Chowning reminisced about her experiences touring the test site, where her father once worked. Senator Titus commented she routinely takes classes to the test site for tours. She wondered whether the recent Chinese nuclear espionage incident may have some effect on the Star Wars program. Mr. Johnson pointed out that is a Department of Defense responsibility.

Mr. Johnson noted Senator Neal has great familiarity with the area. Senator Coffin commented he, too, worked at the test site. He expressed concern that employees be protected from unknown dangers as well as known dangers when they handle materials or may be exposed to hazardous materials. He supported continuing the relationship in a spirit of openness and fairmindedness for not only the employees, but also for those who live nearby.

Mr. Johnson responded that is a key point in the operation today. He acknowledged the Department of Energy did not share a very positive reputation on worker safety, treatment of the environment, or dealings with the public during the Cold War days. He noted the last three secretaries of energy have made it very clear that success will be measured today only by whether or not the mission is accomplished in a safe and environmentally sound manner, protecting the safety of workers and protecting the environment.

Mr. Johnson declared, "It’s my personal commitment that we will operate the test site only if we can do it in full compliance with all environmental regulations. If we cannot meet those regulations, we will stop our activities."

Mr. Johnson voiced his commitment to openness with the public, even though some of the work at the test site is still highly classified. He opined that is no reason not to make the operation clear to the workers and the public.

Mr. Johnson pointed out he had spent the past 2 weeks visiting ranches and the Nye County Commissioners, who raised the same issues of concern. He reported their desire is to be good neighbors but, he added, "They want to be able to trust us, and they want us to be upfront and honest and open with them." Mr. Johnson promised, "My personal commitment to you and to the state and to the public is that we will continue to do that."

Mr. Mitchell commented that Bechtel, a corporation specializing in international engineering and construction business around the world, probably has the finest safety record of any American national company anywhere in the world. He said Bechetel started working for the Department of Energy in the last 6 or 8 years and has been serving the Nevada Test Site since 1996. He asserted Bechtel chose to bring a heritage of safety culture to the test site and is committed to running "the most compelling and pragmatically functional safety programs we know how to run anywhere."

Mr. Mitchell explained Bechtel is a family-owned corporation that considers its employees members of the family.

RESPECTFULLY SUBMITTED:

Judy Jacobs,

Committee Secretary

APPROVED BY:

Senator William J. Raggio, Chairman

DATE:

Assemblyman Morse Arberry Jr., Chairman

DATE: