Legislature(2009 - 2010)HOUSE FINANCE 519
03/22/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| HB369 | |
| HB346 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 314 | TELECONFERENCED | |
| + | HB 346 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 369 | TELECONFERENCED | |
HOUSE BILL NO. 369
"An Act relating to an in-state natural gas pipeline, the
office of in-state gasline project manager, the Joint In-
State Gasline Development Team, and the In-State Gasline
Steering Committee; and providing for an effective date."
2:51:47 PM
Vice-Chair Thomas MOVED to ADOPT CS for HB 369 (FIN), 26-
LS1527\C, Cook, 3/18/10, as a working draft.
Co-Chair Stoltze OBJECTED
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT,
highlighted the changes in the CS described in the CS
Sectional Analysis (copy on file).
"An Act relating to an in-state natural gas pipeline,
the office of in-state gas line project manager, the
Joint In-State Gasline Development Team; requiring the
development of an in-state natural gas pipeline plan,
to be delivered to the legislature by July 1, 2011,
that provides for a gas line that is operational by
December 31, 2015; directing the Joint In-State
Gasline Development Team to assume responsibilities
under sec. 19, ch. 14, SLA 2009; requiring expedited
review and action by state agencies or entities
relating to the in-state natural gas pipeline project;
and providing for an effective date."
Mr. Wright noted the change to the title of the bill. The
title was tightened up to differentiate the legislation
from other bills dealing with natural gas development. He
continued with the sectional.
Section 1: Adds a new chapter, Chapter 34: In-State
natural Gas Pipeline, to AS 38, Public Land.
Sec. 38.34.010. In-state gas line project manager.
(a) Creates the position of in-state gas line project
manager within the governor's Office. This position
will continue until one year after commercial
operation of the in-state natural gas pipeline begins.
(b) The Governor appoints an individual to the
position of an in-state gas line manager and may be
removed at the Governor's discretion. (c) Describes
the duties of the in-state gas line project manager.
Sec. 38.34.020. Expedited review and action by state
agencies or entities. (a) States that any state agency
or entity conducting and taking action relating to the
in-state gas line shall be expedited. (b) A state
agency or entity may not include in any project
certificate, right of way, permit or other
authorization issued to a licensee a term or condition
that is not required by law if the in-state project
manager determines the term or condition would prevent
or impair the expeditious construction and operation
or expansion of the in-state gas line. (c) A state
agency or entity may not, unless required by law,
amend or abrogate any certificate, right of way,
permit or other authorization issued to a licensee if
the project manager determines the action would
prevent or impair the expeditious construction and
operation or expansion of the in-state gas line.
In Section 1 Sec.38.34.020., The word entity was added
to "review and action by state agencies". The
inclusion allows for involvement of entities such as
ANGDA (Alaska Natural Gas Development Authority).
Sec. 38.34.030. Joint In-state Gasline Development
Team. (a) Establishes the Joint In-State Gasline
Development Team in the Governor's Office. The team
consists of the commissioner of the Department of
Transportation and Public Facilities or designee, the
chief executive officer of the Alaska Railroad
Corporation or designee, the chief executive officer
of the Alaska Natural Gas Development Authority, the
in-state gas line project manager and the chief
executive officer of the Alaska Housing Finance
Corporation. (b) Names the Alaska Housing Finance
Corporation's chief executive officer as chair. (c)
Allows the development team to hire staff, enter into
contracts and exercise other powers to carry out its
functions.
The chief executive Officer of the Alaska Housing
Finance Corporation was added as a fifth member and
chair to the Joint In-state Gasline Development Team
in Sec.38.34.030.
Mr. Wright explained that Dan Fauske, (CEO/Executive
Director, Alaska Housing Finance Corporation, Department of
Revenue) would bring his finance and leadership experience
to the team.
2:55:31 PM
Co-Chair Stoltze interjected that he believed in the value
of having a Development Team member who is familiar with
the legislative and budget process.
Mr. Wright elaborated further.
Sec. 38.34.040. Duties of the Development Team. (a)
Ensure a project plan for the development of an in-
state gas line is completed and delivered to the
legislature by July 1, 2011. The project plan must
specify and document how an in-state gas line can be
designed, financed, constructed and made operational
by December 31, 2015. (b) The Joint In-State Gasline
Development Team is to assume all executive authority
over and managerial responsibility for all activities
enumerated under sec. 19, ch. 14, SLA 2009, including
work previously completed, work in process, and work
for which money has been encumbered but that is not
completed on the effective date of this subsection.
(c) Describes specific plans that are to be included
within the project plan for an in-state gas line that
will serve Fairbanks, the south central region of the
state, and other communities whenever practicable,
connecting with or enhancing the existing gas pipeline
system, and reaching to tidewater. (d) The
development team's work product is to include an
analysis of alternative possible routes and select a
route that is consistent with the following
requirements: (1) is the most economical, (2) will
provide gas to residents at a reasonable cost, (3)
allows for connecting lines to serve industrial,
residential and utility customers along the entire
route and in other regions of the state that can be
served at commercially feasible rates, (4) uses state
land and existing state highway and railroad rights of
way to the maximum extent feasible, (5) uses existing
highway and railroad bridges, gravel pits equipment
yards and maintenance facilities and other existing
facilities and resources to the maximum extent
feasible. (e) With the intent that any project-related
assets acquired or developed be available for transfer
or sale to the entity best able to complete the
project, the development team is to: (1) prepare
plans and designs necessary for the construction of
the in-state gas line; (2) coordinate with entities
qualified to build, own and operate the gas line; (3)
identify, apply for and obtain rights-of-way and other
permits for the project route; (4) work with other
entities to promote gas supply and purchase contracts
required for the project to be commercially viable;
(5) prepare cost estimates for project design,
construction and operation to determine the project's
feasibility and the projected cost of natural gas to
consumers; (6) coordinate with and use, to the fullest
extent, possible existing work by other state agencies
and entities before contracting for new reports and
research and analysis; (7) determine regulatory
authority over the pipeline project and perform any
necessary compliance requirements; (8) identify and
apply for, or support extension of, existing permits
for export of Alaska natural gas if that export
improves project economics and will reduce the price
of natural gas to in-state consumers. (f) Any rights
to a gas line corridor obtained by a state agency
under eminent domain may be transferred to a private
entity. (g) Describes the various aspects of the in-
state gas line project the development team may
consider.
Sec.38.34.040, changes the July 1, 2011 deadline from
construction ready to a completed project plan
delivered to the legislature. He added that the change
accommodated concerns raised by the impending
deadline.
Mr. Wright also pointed out that in subsection(c) "the
south central region" includes Valdez. He read the final
change in Sec.38.34.060. Subsection b that dealt with
conflicts of interest.
3:00:22 PM
Sec. 38.34.060. Conflicts of interest. (a) If a
member of the Development Team acquires, owns or
controls a direct or indirect interest in property, an
organization or business that might be affected by the
in-state gas line project or other matters under
consideration by the Development Team shall
immediately disclose the interest to the Development
Team. This disclosure is part of the public record
and shall be included in the minutes of the first
meeting of the Development Team held after the
disclosure. (b) Members of the development team are
subject to AS 39.50 (Public Official Disclosure) and
AS 39.52 (Alaska Executive Branch Ethics Act).
Representative Gara referred to page 4, line 8 of the CS
that calls for analysis of "alternative possible routes".
He explained that alternatives might not be routes. The
alternatives could include importation of liquefied natural
gas or Cook Inlet gas subsidies. He asked the sponsor if he
would change the language to reflect other possibilities.
Representative Chenault wanted time to consider the
request.
Representative Gara understood the goal to be ready to move
forward but wanted to avoid spending money unnecessarily.
He did not want to see gas pipeline engineering plans
discarded. On page 4 line, 23 he requested to insert the
word "preliminary", that would read, "prepare [preliminary]
plans and designs for construction of the in-state natural
gas line project." Representative Chenault argued that even
though he dislikes wasting money the state should pay for
whatever plans are necessary to determine costs.
3:04:17 PM
Representative Gara referred to line 27, of the CS,
regarding obtaining right-of-ways. He wondered if it was a
waste of money to obtain right-of-ways that might not be
used. Representative Chenault believed that in order for
the project to move forward the state will need to spend
money up front to develop right-of-ways. He felt resolving
right-of-way issues was essential to promoting the project
to a private entity.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered. The CS for HB 369 (FIN), 26-
LS1527\C, Cook, 3/18/10CS was adopted.
3:06:29 PM RECESS
3:07:45 PM RECONVENED
Representative Chenault recalled Representative Gara's
request to change the language in the CS on page 4, line 8
to delete the word "routes". He stated that he did not want
to change the language. He felt that although liquefied
natural gas imports might become a stop gap measure, HB 369
was written specifically, to develop an in-state gas line.
Representative Gara announced that he supported leaving HB
369 as a pipeline bill but pointed out that on Page 4, line
8 of the CS the language called for analyzing alternatives.
He felt that leaving the word routes narrowed analysis of
all options. He wanted the state to be free to analyze any
cheaper alternatives. Representative Chenault offered that
there are a number of options being evaluated by other
sources. His specific bill dealt with the development of
in-state gas pipeline routes not alternative options. He
felt that all of the options will be evaluated once all of
the information and cost analysis is gathered.
Co-Chair Hawker interjected that Speaker Chennault's
intention was to present legislation to promote an in-state
gas line not liquefied natural gas importation. Speaker
Chenault affirmed.
3:11:44 PM
Representative Doogan asked if the pipeline project will be
limited in size by AGIA. Representative Chenault stated
that the project would not be limited to the 500 bcf
(billion cubic feet) specified by AGIA depending on the
state's involvement.
Representative Gara referred to page 4, lines 23 and 27 of
the CS. He asked the sponsor to consider adding the word
"preliminary" before plans on line 23. On line 27, he
requested adding "applying" for and omit "and obtain
rights-of-way and". He stated that he offered these
conceptual amendments as cost saving measures to limit
ineffectual effort by the state. Speaker Chenault
reiterated that it is imperative to have the rights-of-ways
in place in order to transfer or sell the project to a
private entity. He read the following:
Page 4, lines 20-21, "With the intent that any
project-related assets acquired or developed be
available for transfer or sale to the entity best able
to complete the project…"
Speaker Chenault stressed that if the state must own or
control right-of-ways to support project completion it was
a valuable use of state funds.
Co-Chair Hawker interjected that there are not mandates in
HB 369. He emphasized that the bill only requires a project
plan be delivered to the legislature by July 1, 2011. He
cautioned that prescribing limits to a dynamic process
could hurt the outcome of the project.
3:16:49 PM
Mr. Wright explained that any private entity interested in
the feasibility of the project will do its own analysis.
Representative Austerman asked if the bill allows the state
to build and own the pipeline and lease it out for
operation.
Representative Chenault asserted that he would not want the
state to build the in-state gas line. However the
legislation does not preclude the state from participating
in any form.
Representative Fairclough referred to page 5, lines 12-13,
that allows for a state agency to transfer any acquired gas
line corridor rights to a private entity. She wondered if
that was a normal process for state. Representative
Chenault stated he did not know the answer.
Co-Chair Hawker added that the language was added at the
request of the Department of Transportation and Public
Facilities to clarify the department's ability to do so.
3:20:51 PM
FRANK RICHARDS, DEPUTY COMMISSIONER, HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, explained that the state is currently
prohibited to transfer land obtained by a state agency
through eminent domain to a private entity.
Representative Fairclough referred to Sec.38.34.050 that
dealt with confidentiality. She observed that the
development team will have access to confidential
information and pointed out that the bill would add a new
layer of access by someone other than commissioners.
Representative Chenault read lines 30-31 of Sec.38.34.050.
"Confidential information received by the development
team shall be kept confidential."
Co-Chair Hawker closed public testimony. He called for
discussion of the fiscal notes. He referenced the new FN
(OOG) dated 3/12/2010 (copy on file) and noted it was
indeterminate.
Bob Swenson, Manager, In-State Gasline Project, Office of
the Governor; relayed that the fiscal note was outdated and
no longer applied to the CS version of the legislation.
Co-Chair Hawker asked if the updated fiscal note
information was available. Mr. Swenson stated it was.
Representative Kelly pointed out that the legislature
previously approved the Governor's requests for in-state
pipeline development funds. He requested Mr. Swenson
delineate the expenditure of the funds as it relates to the
current project.
Co-Chair Hawker elaborated that the Governor requested an
additional $6.5 million dollars in this year's operating
budget for in-state gas line development. He informed the
committee that a fiscal note for the legislation would
incorporate the appropriation request. He requested Mr.
Swenson provide a recap of the overall fiscal requirements
to move the project forward under the authority of HB 369.
Mr. Swenson summarized the projected fiscal note
expenditures. He stated that the fiscal note total is $
8,000,053. Incorporated in that total is $ 1,000,095 for
personal services. He highlighted the positions deemed
necessary due to the accelerated timeline for completion of
the project plan. He listed them as follows: project
manager, engineering manager, commercial manager,
legislative liaison/public outreach officer, finance and
budget analyst, schedule coordinator, and finally a
technical writer. He added that $6.8 million was requested
for contractual services. He noted the contractual services
request was similar to the entire operating budget request
of 6.5 million with the additional amount intended for
market analysis. He expounded that the contractual services
request was divided into four components. The first
component was completion of environmental and permitting
activities and state and federal right-of-way approvals.
That includes all of the different issues involved in the
permitting process. The second component of the request was
project management and engineering data acquisition to
further refine the engineering design.
3:31:24 PM
The third component was refinement of cost of service
estimates and tariff modeling. The component was expanded
to incorporate both possible routes. The fourth component
consisted of a complete documentation of pipeline assets
for commercial offering.
Co-Chair Hawker wondered if the mandates could be completed
in one year for the additional approximately $1.2 million
over the Governor's original operating budget request. He
noted the additional funds were for personal services to
get the work done. Mr. Swenson stated that was correct. He
offered that in reference to the fiscal note the years out
from FY 2011 remain indeterminate dependent upon outcomes
of the plan. Co-Chair Hawker robustly concurred.
Representative Austerman asked if it was possible to
project the expenditures for the out years. Mr. Swenson
voiced that the "what if" scenario is incredibly broad and
depends on what part of the project the state is willing to
undertake. He believed it would be impossible at this time.
3:35:25 PM
Co-Chair Hawker asked that in reference to the fiscal
notes, if the mission of the bill is essentially the same
as the intent directive from the legislature except for the
accelerated timeline and creation of clear management
hierarchy and authority. Mr. Swenson affirmed. He stated
the accelerated timeline was worrying. The assurance that
an in-state gas pipeline operational by December 31, 2015
was of particular concern. The permitting process was out
of the state's control and difficult to submit to an
aggressive timeline.
Mr. Swenson shared that another issue is optimization. He
explained that the earliest phase of a massive project is
the most important and affects the costs of the project
over time. Significant optimization effort must be taken
early on in a project to save money in the long term.
Optimization is not always conducive to an accelerated
timeline. He stated that these issues should be addressed
before moving forward.
Co-Chair Hawker agreed. He commented that in terms of the
fiscal note it was basically the same project that the
administration had all ready been working on. He
ascertained that there was coordination of fiscal note
preparation with the other departments involved in the
project.
Representative Kelly asked how the role of project manager
would interact with the Development Team. Mr. Swenson was
not certain how the management structure was going to be
set up.
3:44:53 PM RECESS
3:51:39 PM RECONVENED
Representative Fairclough referenced page 5, lines 12 and
13 of the CS regarding eminent domain.
Representative Fairclough wondered what transferring gas
line corridor rights to a private entity means to the
state. She asked if the state could recover those rights if
necessary. Mr. Richards understood that the contract with
the private entity developer would provide a construction
right-of-way and contain a reverter clause. He revealed
that when construction is completed the property will
revert back to state ownership. Representative Fairclough
asked if the contract language adequately protects the
states interest. Mr. Richards answered that the contract
reverts the property rights back to the state even in a
scenario that the project is not completed. Representative
Fairclough wondered if the state's interest is protected if
the private entity sells their assets to another party. Mr.
Richards did not know the answer.
HB 369 was HEARD and HELD in Committee for further
consideration.