Legislature(2009 - 2010)
2009-03-02 Senate Journal
Full Journal pdf2009-03-02 Senate Journal Page 0410 SB 136 SENATE BILL NO. 136 BY THE SENATE RULES COMMITTEE BY REQUEST OF THE GOVERNOR, entitled: "An Act relating to noncompetitive leases of state land and for rights-of-way for oil or natural gas pipelines that originate and terminate within the state and to the regulation and certification of those pipelines; relating to conditional certification for certain new natural gas pipelines; relating to definitions of "common carrier" and "firm transportation service" in the Pipeline Act." was read the first time and referred to the Senate Special Committee on Energy, Resources and Finance Committees. The following fiscal information was published today: Fiscal Note No. 1, zero, Department of Natural Resources Fiscal Note No. 2, zero, Department of Commerce, Community and Economic Development Governor's transmittal letter dated February 27: Dear President Stevens: Under the authority of Article III, Section 18, of the Alaska Constitution, I am transmitting a bill relating to noncompetitive leases of state land and for rights-of-way for oil or natural gas pipelines that originate and terminate within the state and to the regulation and 2009-03-02 Senate Journal Page 0411 certification of those pipelines; relating to conditional certification for certain new natural gas pipelines; and relating to definitions of "common carrier," and "firm transportation service" in the Pipeline Act, AS 42.06. The major provisions of the bill relate to covenants attached to state right-of-way leases by the Department of Natural Resources (DNR), certification by the Regulatory Commission of Alaska (RCA), and expanding the definition of "common carrier" with respect to North Slope natural gas pipelines to include carriers that offer both firm and interruptible transportation service. Under current law, natural gas pipelines that cross state land, and require a state right-of-way under the Alaska Right-of-Way Leasing Act, AS 38.35, are subject to the covenants listed in AS 38.35.120. The covenants include a requirement that those pipelines operate as "common carriers." Generally, common carrier pipelines must accommodate all shippers upon reasonable request, may not show undue preference or discrimination among similarly situated shippers, and, if shippers' requests for service exceed the capacity of the pipeline, must prorate shipper nominations. These requirements can foreclose pipeline carriers and shippers from fashioning long-term capacity commitments. Allowing common carriers to offer firm transportation service that is not subject to prorated reductions can stimulate pipeline development under certain circumstances. The assurance of unimpeded access to capacity is a strong inducement to shippers, and will anchor pipeline construction and expansion. Conversely, the lack of assurance to access may discourage development. Sections 1 and 2 of the bill are technical conforming amendments. Section 3 of the bill would require that natural gas pipelines that originate and terminate in the state, and that require a state right-of- way lease, will meet conditions that favor expansion, and offer expansion rates that promote new entrants into the line. This section is modeled on many of the conditions required of applicants under AS 43.90.130 of the Alaska Gasline Inducement Act (AGIA). For example, lessees would have to commit to periodic binding open seasons, commit to expanding on commercially reasonable terms, and commit to rolled-in rates on expansions, subject to a ceiling of 15 2009-03-02 Senate Journal Page 0412 percent of negotiated rates. Lessees would also have to agree to hire Alaska residents and contract with Alaska businesses to the extent permitted by law, and commit to negotiate a project labor agreement to the extent permitted by law. Section 4 of the bill contains definitions of "commercially reasonable terms" and "reasonable engineering increment" in order to make more precise the expansion terms in sec. 3 of the bill. Section 5 of the bill would clarify that the "open season" required of North Slope natural gas pipeline carriers by the Pipeline Act applies only to the extent that lease covenants under the Alaska Right-of-Way Leasing Act do not contain "open season" provisions. The RCA is already empowered under AS 42.06.140(a)(2) to enforce lease covenants, including those that contain an "open season" process, so compliance with the "open season" process in AS 42.06.240(f) would be redundant. Section 6 of the bill would provide for conditional certification by the RCA for pipelines that are in the public interest, and that otherwise meet the requirements for granting a certificate of public convenience and necessity, but that have not yet obtained financing or do not possess firm transportation commitments, or both. This provision could, in some circumstances, provide greater predictability as to the timing and outcome of the regulatory process, and may reduce the cost and facilitate the development of a project by assuring potential shippers and financing partners of ultimate regulatory approval. Section 7 of the bill would clarify that the RCA can require an exclusively in-state natural gas pipeline carrier to extend or enlarge its facilities under standards found in the Alaska Right-of-Way Leasing Act. This would enable the RCA to enforce access to pipeline facilities for all prospective shippers as required by DNR in the leasing process. Section 9 of the bill would modify the definition of "common carrier" as it pertains to natural gas pipelines to include firm transportation service and interruptible transportation service. Coupled with sec. 8 of the bill, which would redefine "firm transportation service," this provision would allow, but would not require, natural gas pipeline 2009-03-02 Senate Journal Page 0413 carriers to offer, and shippers to arrange, for firm transportation service that would not be subject to curtailment except in the case of reduced pipeline capacity. Currently, common carriers may offer firm transportation service, but if total tendered shipments exceed pipeline capacity, shipments by all shippers must be curtailed pro rata. This proposed legislation, together with a separate submittal today proposing to broaden the responsibilities of the Alaska Natural Gas Development Authority (ANGDA), will form the initial statutory framework for the development of in state gasline for use by Alaskans. Additionally, the key action to bring a long term stable supply of Alaska gas to Alaska consumers will be an action plan, and the people that implement that plan to jump start work immediately on an instate gas pipeline. The action plan will include evaluation of options for routes, gas resources and potential industrial and residential users; commencement of right of way and permitting work; preliminary engineering; and a firm timetable for accomplishing this work. We will provide details of this action plan within the next week. I urge your prompt and favorable action on this measure. Sincerely, /s/ Sarah Palin Governor