SB 226: "An Act relating to stranded gas pipeline carriers and to the intrastate regulation by the Regulatory Commission of Alaska of pipelines and pipeline facilities of stranded gas pipeline carriers."
00SENATE BILL NO. 226 01 "An Act relating to stranded gas pipeline carriers and to the intrastate regulation 02 by the Regulatory Commission of Alaska of pipelines and pipeline facilities of 03 stranded gas pipeline carriers." 04 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 05 * Section 1. AS 38.35.120(a) is amended to read: 06 (a) A noncompetitive lease of state land for a right-of-way for an oil or natural 07 gas pipeline valued at $1,000,000 or more may be granted only upon the condition that 08 the lessee expressly covenants in the lease, in consideration of the rights acquired by 09 it under the lease, that 10 (1) it assumes the status of and will perform all of its functions 11 undertaken under the lease as a common carrier and will accept, convey, and transport 12 without discrimination crude oil or natural gas, depending on the kind of pipeline 13 involved, delivered to it for transportation from fields in the vicinity of the pipeline 14 subject to the lease throughout its route both on state land obtained under the lease and
01 on the other land; however, a lessee that [WHO] owns or operates a natural gas 02 pipeline 03 (A) subject to regulation either [(A)] under the Natural Gas Act 04 (15 U.S.C. 717 et seq.) of the United States [,] or [(B)] by the state or political 05 subdivisions with respect to rates and charges for the sale of natural gas, is, to 06 the extent of that regulation, exempt from the common carrier requirement in 07 this paragraph; it will accept, convey, and transport crude oil or natural gas 08 without unjust or unreasonable discrimination in favor of one producer or 09 person, including itself, as against another but will take the crude oil or natural 10 gas, depending on the kind of pipeline involved, delivered or offered, without 11 unreasonable discrimination, that the Regulatory Commission of Alaska shall, 12 after a full hearing with due notice to the interested parties and a proper finding 13 of facts, determine to be reasonable in the performance of its duties as a 14 common carrier; 15 (B) as a stranded gas pipeline carrier, as that term is 16 defined in AS 42.06.630, is required to operate as a common carrier only 17 with respect to the intrastate transportation of stranded gas and is not 18 otherwise required to perform its functions under the lease as a common 19 carrier; 20 (2) it will interchange crude oil or natural gas, depending on the kind 21 of pipeline involved, with each like common carrier and provide connections and 22 facilities for the interchange of crude oil or natural gas at every locality reached by 23 both pipelines when the necessity exists, subject to rates and regulations made by the 24 appropriate state or federal regulatory agency; 25 (3) it will maintain and preserve books, accounts, and records and will 26 make those reports that the state may prescribe by regulation or law as necessary and 27 appropriate for purposes of administration of this chapter; 28 (4) it will accord at all reasonable times to the state and its authorized 29 agents and auditors the right of access to its property and records, of inspection of its 30 property, and of examination and copying of records; 31 (5) it will provide connections, as determined by the Regulatory
01 Commission of Alaska under AS 42.06.340, to facilities on the pipeline subject to the 02 lease, both on state land and other land in the state, for the purpose of delivering crude 03 oil or natural gas, depending on the kind of pipeline involved, to persons (including 04 the state and its political subdivisions) contracting for the purchase at wholesale of 05 crude oil or natural gas transported by the pipeline when required by the public 06 interest; 07 (6) it shall, notwithstanding any other provision, provide connections 08 and interchange facilities at state expense at such places the state considers necessary 09 if the state determines to take a portion of its royalty or taxes in oil or natural gas; 10 (7) it will construct and operate the pipeline in accordance with 11 applicable state laws and lawful regulations and orders of the Regulatory Commission 12 of Alaska; 13 (8) it will, at its own expense, during the term of the lease , 14 (A) maintain the leasehold and pipeline in good repair; 15 (B) promptly repair or remedy any damage to the leasehold; 16 (C) promptly compensate for any damage to or destruction of 17 property for which the lessee is liable resulting from damage to or destruction 18 of the leasehold or pipeline; 19 (9) it will not transfer, assign, or dispose of in any manner, directly or 20 indirectly, or by transfer of control of the carrier corporation, its interest in a right-of- 21 way lease, or any rights under the lease or any pipeline subject to the lease to any person 22 other than another owner of the pipeline (including subsidiaries, parents , and affiliates of the 23 owners), except to the extent that the commissioner, after consideration of the protection of 24 the public interest (including whether the proposed transferee is fit, willing , and able to 25 perform the transportation or other acts proposed in a manner that will reasonably protect the 26 lives, property , and general welfare of the people of Alaska), authorizes; the commissioner 27 shall not unreasonably withhold consent to the transfer, assignment , or disposal; 28 (10) it will file with the commissioner a written appointment of a 29 named permanent resident of the state to be its registered agent in the state and to 30 receive service of notices, regulations, decisions , and orders of the commissioner; if 31 it fails to appoint an agent for service, service may be made by posting a copy in the
01 office of the commissioner , [AND] filing a copy [OF IT] in the office of the lieutenant 02 governor , and [BY] mailing a copy to the lessee's last known address; 03 (11) the applicable law of this state will be used in resolving questions 04 of interpretation of the lease; 05 (12) the granting of the right-of-way lease is subject to the express 06 condition that the exercise of the rights and privileges granted under the lease will not 07 unduly interfere with the management, administration, or disposal by the state of the 08 land affected by the lease, and that the lessee agrees and consents to the occupancy 09 and use by the state, its grantees, permittees, or other lessees of any part of the right- 10 of-way not actually occupied or required by the pipeline for the full and safe utilization of the 11 pipeline, for necessary operations incident to land management, administration, or disposal; 12 (13) it will be liable to the state for damages or injury incurred by the 13 state caused by the construction, operation , or maintenance of the pipeline and it will 14 indemnify the state for the liabilities or damages; 15 (14) it will procure and furnish liability and property damage insurance 16 from a company licensed to do business in the state or furnish other security or 17 undertaking upon the terms and conditions the commissioner considers necessary if the 18 commissioner finds that the net assets of the lessee are insufficient to protect the 19 public from damage for which the lessee may be liable arising out of the construction 20 or operation of the pipeline. 21 * Sec. 2. AS 42.05.711 is amended by adding a new subsection to read: 22 (n) The provisions of this chapter do not apply to a person who owns or 23 operates a natural gas pipeline as a stranded gas pipeline carrier, as that term is defined 24 in AS 42.06.630. 25 * Sec. 3. AS 42.06.230(b) is amended to read: 26 (b) The commission's jurisdiction and authority extend to 27 (1) an oil or gas pipeline facility operating in a municipality, whether 28 home rule or otherwise ; if [. IF] a conflict between a certificate, order, decision, or 29 regulation of the commission and a charter, permit, franchise, ordinance, rule, or 30 regulation of such a local governmental entity occurs, the certificate, order, decision, 31 or regulation of the commission prevails ; and
01 (2) the intrastate transportation of stranded gas through a stranded 02 gas pipeline . 03 * Sec. 4. AS 42.06.240 is amended by adding a new subsection to read: 04 (f) In addition to other requirements of (a) - (e) of this section, the provisions 05 of this subsection apply to a certificate of public convenience and necessity for a 06 stranded gas pipeline carrier or person that will be a stranded gas pipeline carrier under 07 this chapter: 08 (1) the person making application shall dedicate a portion of the 09 pipeline's initial capacity sufficient to transport the total volume of stranded gas that 10 has been committed by producers and shippers of stranded gas to tendering for 11 intrastate firm transportation service at the time that the operation of the stranded gas 12 pipeline commences; 13 (2) upon receipt of the certificate application under this subsection, the 14 commission shall issue a public notice inviting prospective intrastate shippers of 15 stranded gas to file requests for service; a request for service submitted by a shipper 16 in response to a notice issued under this paragraph must include a proof of the 17 shipper's commitment to use the stranded gas pipeline for intrastate firm transportation 18 service, specifying the volume of stranded gas that the shipper will tender for initial 19 intrastate firm transportation service; 20 (3) in its review of an application submitted under this subsection, 21 (A) for purposes of evaluating the total volume of intrastate 22 transportation of stranded gas to be accepted for initial intrastate transportation, 23 the commission 24 (i) shall determine total volume based upon written 25 commitments to tender stranded gas for intrastate firm transportation 26 service continuously for a period of not less than three years after the 27 operation of the stranded gas pipeline commences; each request for 28 service by an intrastate shipper who purchases stranded gas from a 29 stranded gas producer must be supported by one or more contracts for 30 the purchase of the stranded gas on a take-or-pay basis that extends for 31 a period of not less than three years after the operation of the stranded
01 gas pipeline commences; 02 (ii) may consider peak volumes specified in the written 03 commitments of stranded gas producers and purchase contracts; and 04 (B) the commission shall set out in its order granting a 05 certificate of public convenience and necessity the total volume of intrastate 06 stranded gas that the stranded gas pipeline carrier shall accept for intrastate 07 transportation; the total volume may not exceed the volume substantiated by 08 written commitments and contracts that comply with the requirements of this 09 chapter; 10 (4) if the stranded gas pipeline carrier wants to transport stranded gas 11 within the state in excess of the amount set out in the statement of total volume in the 12 pipeline carrier's certificate of public convenience and necessity, the pipeline carrier 13 may apply for authority to transport a greater volume of stranded gas within the state 14 than the carrier is required by the commission to transport in its order entered under 15 (3)(B) of this subsection; the commission shall grant the authority requested by the 16 pipeline carrier if the commission determines that the pipeline carrier's transportation 17 of a greater volume is consistent with public convenience and necessity. 18 * Sec. 5. AS 42.06.310 is amended by adding a new subsection to read: 19 (d) The requirement of (c) of this section does not apply to a stranded gas 20 pipeline carrier to the extent that the capacity of the carrier's stranded gas pipeline 21 does not allow for expanded capacity, and does not apply to require a stranded gas 22 pipeline carrier to enlarge or extend its stranded gas pipeline system; however, 23 (1) the commission may require a stranded gas pipeline carrier to 24 expand, enlarge, or extend its stranded gas pipeline system if, after notice and 25 opportunity for hearing, the commission determines that 26 (A) a person making a request for expanded, enlarged, or 27 extended service by a stranded gas pipeline carrier has made a firm contractual 28 commitment to the stranded gas pipeline carrier to transport stranded gas in 29 sufficient quantity so that meeting the commission's requirement will not 30 impose an undue financial burden on the stranded gas pipeline carrier or its 31 customers; and
01 (B) the ability of the stranded gas pipeline carrier to provide 02 adequate services to its customers is not impaired; and 03 (2) if, under (1) of this subsection, the commission requires a stranded 04 gas pipeline carrier to expand, enlarge, or extend its stranded gas pipeline system, the 05 commission shall set rates for the service so that the additional cost of the requirement 06 is borne by the person making the request, taking into consideration any benefits to 07 customers of the stranded gas pipeline carrier that may result from the expansion, 08 enlargement, or extension of the system. 09 * Sec. 6. AS 42.06.350 is amended by adding a new subsection to read: 10 (c) In its tariff filed with the commission under (a) of this section, a stranded 11 gas pipeline carrier may charge separate rates for firm transportation service and for 12 interruptible transportation service. A stranded gas pipeline carrier 13 (1) may, in addition, impose a reservation fee or similar charge for 14 reservation of capacity in a stranded gas pipeline as a condition of providing firm 15 transportation service; the reservation fee or charge imposed by the carrier may not 16 include any variable costs or fixed costs that are not attributable to the provision of 17 firm transportation service; 18 (2) may not impose a reservation fee or similar charge for reservation 19 of capacity in a stranded gas pipeline for interruptible transportation service. 20 * Sec. 7. AS 42.06.630 is amended by adding new paragraphs to read: 21 (11) "capacity" means, with reference to a stranded gas pipeline, the 22 average daily volume throughput of the stranded gas pipeline, calculated at the normal 23 operating pressure of the stranded gas pipeline as set out in the pipeline design; 24 (12) "firm transportation service" means service by a stranded gas 25 pipeline carrier that is not subject to a prior claim by another shipper or another class 26 of service; service constitutes "firm transportation service" if the service receives the 27 same priority as any other class of firm transportation service; 28 (13) "interruptible transportation service" means service by a stranded 29 gas pipeline carrier in which the carrier's pipeline system capacity may be subject to 30 a prior claim by another shipper or another class of service; a service constitutes 31 "interruptible transportation service" if the service is given a lower priority than
01 another class of service, resulting in noncontinuous service to a shipper of stranded 02 gas; 03 (14) "intrastate," as applied to the transportation of stranded gas, means 04 the transportation of stranded gas between any point within the state and another point 05 within the state, for ultimate consumption of the stranded gas within the state; 06 (15) "stranded gas" has the meaning given in AS 43.82.900; 07 (16) "stranded gas pipeline" or "stranded gas pipeline facility" means 08 all the facilities of a total system of pipe, whether owned or operated by a stranded gas 09 pipeline carrier under a contract, agreement, or lease, in this state used by a stranded 10 gas pipeline carrier for transportation of stranded gas for delivery, storage, or further 11 transportation, including all pipe, pump, and compressor stations, station equipment, 12 gas processing plants, treaters, separators, and all other facilities used or necessary for 13 an integral line of pipe to carry out the transportation from point to point, but 14 excluding marine terminal facilities and the integrated plant, facilities, and equipment, 15 including pollution control equipment, used for conditioning, storage, handling, or 16 processing of stranded gas into liquefied natural gas; 17 (17) "stranded gas pipeline carrier" means the owner, including a 18 corporation, company, or other entity organized under the laws of the United States or 19 of a state, of a stranded gas pipeline, or an interest in it, or a person, including a 20 corporation, company, or other entity, organized under the laws of the United States 21 or of a state, authorized to construct, operate, or extend stranded gas pipeline facilities 22 under this chapter.