Legislature(2001 - 2002)
03/28/2001 03:35 PM Senate RES
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* first hearing in first committee of referral
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SB 164-NO GAS PIPELINE OVER BEAUFORT SEA
CHAIRMAN TORGERSON announced SB 164 to be up for consideration. He
explained that SB 164 makes legislative findings saying, "We want
the North Slope gas for the highest utilization to be made for in-
state usage to the maximum - jobs and opportunities that are within
the state for value-added opportunities and adding significant
long-term property base for the state and the bill concludes with
making a legislative Best Interest Finding that prohibit the
Commissioner from issuing a lease for the right-of-way over the top
until a line is built south."
MR. MICHAEL HURLEY, North American Natural Gas Pipeline Group, said
the three companies in the group are BP, ExxonMobil, and Phillips
and they are, "working diligently to develop an economically viable
project to commercialize North Slope natural gas by pipeline
through Canada to the Lower 48 markets."
FERC, before it issues a Certificate of Public Convenience and
Necessity, requires them to analyze alternative pipeline route
options as part of the application process. This project has the
potential to be the largest energy project in North America and
will require capital investments in the billions of dollars. He
said their energies are used for a thorough evaluation of
alternatives and an understanding of their relative strengths,
weaknesses, risks and rewards. Their efforts are, "focused on
creating and understanding opportunities, not prematurely
discarding them. This legislation would do the later."
MR. HURLEY said that limiting options would discourage other
investors in Alaska projects. Any Alaskan projects, "must be able
to deliver products to the market at a competitive cost in order to
succeed. There are many other competing sources of supply and
buyers will go elsewhere if a project fails in that regard. While
our work may show that a southern route does offer the best
combination of benefits and economic viability to Alaskans, it must
be realized that efforts to prohibit the consideration of other
development options, such as a northern route, may impede an Alaska
natural gas project from moving forward."
MR. HURLEY said they were listening to the views of the Alaskan
legislature and Alaskan citizens and were evaluating the
alternatives on the basis of seven criteria:
· Overall project economics
· Alaskan access to gas
· Jobs for Alaskans
· Revenue to the State
· Safety
· Environmental protection
· Project timing
We do not feel that we have enough information, yet, to
make a route decision. That is the reason for our
aggressive work program this year. The effect this
legislation will have on FERC and other agency permit
applications is as yet unknown.
SENATOR TAYLOR asked how this legislation would preclude them from
analyzing all the routes.
MR. HURLEY answered that they don't think that; they don't know
what FERC will require of them as a result of its passage.
CHAIRMAN TORGERSON said he, "Found it difficult to believe FERC is
going to make you look at options when the President of the United
States and Congress has picked one. FERC doesn't have a dog in this
fight." He thought not wanting the southern route was an
intercompany policy.
MR. HURLEY replied that they are approaching this as a green field
application that would require an alternative analysis as part of
the backup of the application.
CHAIRMAN TORGERSON asked if they were ignoring the authorized
route.
MR. HURLEY replied that the lack of clarity about how the old laws
applied and whether they still apply has caused them to push
forward as if it were a green field application.
SENATOR LINCOLN said that she was a bit offended by his testimony
today. "To me it suggests that we have not been diligent in our
analysis of the different routes and what's in the best interests
of the state." She didn't think there had ever been any question
about the dedication of Alaskans' access to gas and jobs, revenues
to the state, safety and environmental protection. As far as
timing, "We would like to see that done as quickly as possible…"
SENATOR LINCOLN continued: "This Chair, I've given him great kudos
for really taking the Resources Committee through all of the
routes, to hearing the public testimony, hearing from the
producers, to hearing from the different groups that have an
interest in this."
MR. HURLEY apologized and said it wasn't intended to offend.
MR. BILL BRITT, Alaska State Pipeline Coordinator, strongly
supported SB 164. The over-the-top route is not in the state's best
interests for the reasons sighted nor do they believe it would be
cheaper or faster due to a variety of design and permitting
considerations.
However, a brief legal review has revealed some possible legal and
constitutional issues, especially related to separation of powers.
He said they needed more time to examine the issue. They are
concerned about the precedent of this very prescriptive statute.
They agree with the policy, but feel that they would be led to the
same result without the prohibition in section (b), page 3.
CHAIRMAN TORGERSON asked what the separation of powers issue he was
concerned with.
Number 1800
MR. JACK GRIFFIN, Supervisor of the Oil and Gas Division in the
Department of Law, said their legal review has been cursory, but on
the face of the bill there is a separation of powers concern.
While the legislature clearly has the constitutional
authority to establish land use policy in the first
instance, as a rule it establishes that policy on laws of
general applicability and leaves the implementation of
that policy to the executive branch. That's the approach
the legislature has chosen and is reflected in the
current Right-of-Way Leasing Act.
SB 164, on the other hand, starts off with the general
and very legitimate policy consideration articulated by
the legislature, but then in subparagraph (b), directs
the commissioner to exercise the discretion in the event
the commissioner sees application for a particular
project in a particular area. The problem here is not
really what the bill would do, but how it would do it.
For example, the legislature clearly makes the state
lands under the Beaufort Sea a state park. The
legislature could clearly circumscribe the territorial
reach of the Right-of-Way Leasing Act so that it doesn't
reach submerged lands and the legislature could follow
its legitimate policy articulating not only applicable
policy considerations that must be evaluated and applied
by the executive to implement this particular act. Those
would be much easier to defend.
It's possible to put an interpretive clause on section
(b) that would in effect interpret it as essentially a
elucidation on the territorial scope of the Right-of-Way
Leasing Act. I think the problem with that particular
interpretation, though, is that it ignores the
specificity with which the bill identifies the offending
project. For example, the commissioner can still issue a
right-of-way lease for a gas pipeline that would follow
the ANWR coast to Kaktovik. The pipeline goes on to
Canada and then south at the commissioner's discretion
has been eliminated. Conditions are [indisc.] saying
separation of powers concerns that the specificity with
which that particular project is identified raises, at
least potentially, concerns under the United State
Commerce Clause and under the U.S. and State people's
protection clauses.
He didn't have enough time to analyze whether those concerns are
significant, but on the face of the bill they could be significant.
CHAIRMAN TORGERSON said those same concerns were also in the
NorthStar agreement in which Kachemak Bay Reserve was made off
limits to oil and gas drilling, and that passed muster of the
Supreme Court. He advised Mr. Griffin to check it out if he had
some free time, but he thought it would be a waste.
SENATOR TAYLOR moved to pass SB 164 from committee with individual
recommendations. There were no objections and it was so ordered.
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