Legislature(2003 - 2004)
02/16/2004 03:36 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 271-NATURAL GAS DEVEL AUTHORITY PROJECTS
CHAIR SCOTT OGAN announced SB 271 to be up for consideration.
MR. HAROLD HEINZE, CEO, Alaska Natural Gas Development Authority
(ANGDA), noted the current zero fiscal note. He informed the
committee that to stay involved in the project, he had written a
letter to the two different applicant groups under the Stranded
Gas Act. He could live with a zero fiscal note for the present,
but if ANGDA's involvement became serious in the future, it
would need additional support.
CHAIR OGAN asked if he had received a response to the letters.
MR. HEINZE replied that he only wrote the letters last week
and, therefore, it was a little early.
SENATOR ELTON asked if he had any discussion with the Department
of Revenue (DOR) on protocol when he wrote the letters.
MR. HEINZE replied that since the last hearing, he had numerous
discussions with Deputy Commissioner Porter on their
relationship. He summarized the discussions saying that the
Authority is prepared to work diligently as a major element of
the team to assure that the stranded gas applications receive
all the consideration possible. He wrote the letters because he
wanted both applicants to understand that the authority had
certain abilities that were very unique to it as a public
corporation.
SENATOR ELTON was concerned that the applicants know there is
only one point of access to negotiate their contracts and he
wanted it to be through the governor's negotiating team.
MR. HEINZE responded that the Authority has nothing to do with
the negotiations that will take place, but it does help the
project move along to becoming a commercial reality.
SENATOR ELTON continued to voice his concern that ANGDA express
itself through the Department of Natural Resources (DNR) and the
governor's negotiating team.
CHAIR OGAN chimed in to say that ANGDA has nothing to do with
the TransCanada pipeline project; its scope is Prudhoe Bay to
Valdez. But, the Authority's tax-free status might be of
interest to the applicants [the producers] and requiring it to
review the state's involvement in the pipeline is important,
because it uses more of a private sector approach.
MR. HEINZE pledged:
If it is the desire of the State of Alaska, as a
matter of policy, that the Authority not look at the
fact that we share the first 530 in common with moving
gas from the North Slope down the highway or wherever
it goes, if we're not supposed to look at that in a
commercial way - we might combine our efforts with
each of the sponsor groups - then, I think we need to
know that. It is certainly the view of the Authority,
and we have maintained this position throughout, we
will work with any legitimate project sponsor in any
way, shape or form...[END OF TAPE].
TAPE 04-9, SIDE B
SENATOR ELTON said he didn't know the tenor of the letters and
asked if Mr. Heinze could send a copy to the chair.
MR. HEINZE apologized that that hadn't been done and said he
would.
SENATOR ELTON expanded on his concern saying that DOR had the
responsibility to share appropriate information with ANGDA and
that ANGDA should share information with DNR, also. Letters that
go out should be funneled through one place.
MR. HEINZE offered to send copies of all his letters to the
committee and to send them through whomever they direct him to
send them through.
MR. STEVEN PORTER, Deputy Commissioner, DOR, inserted that there
is a single contact point for negotiations and both
Exxon/ConocoPhillips/BP [the Producers] and MidAmerica know who
they are negotiating with and how to distinguish between the
Authority and negotiations with the state under the Stranded Gas
Act. He affirmed that there are two applications under the
Stranded Gas Act and that he intends to negotiate with them
simultaneously. He used a truckers analogy to expand on his
explanation. Basically, the State of Alaska is the owner of a
field; the industry leased the field and produced a harvest. The
harvest can go to market one of three ways. Industry can do it
themselves; the state can buy its own trucking line and
independents can bring the product to market. Often, a trunk
line goes from L.A. to Chicago and the little cities in between
don't get serviced unless the independents service them. He sees
the Authority complementing the trunk line by focusing on in-
state gas benefits (like spur lines to smaller communities).
SENATOR ELTON took a line out of one of the letters to
ConocoPhillips/BP and ExxonMobil [the Producers] that read:
Your Beaufort Sea alternative route might become
possible if North Slope gas was available to Alaskans
as provided for in our project and we would also
welcome the opportunity to discuss your cooperation
toward that objective.
He asked if that letter had been vetted by Mr. Porter, would
that line have been in it.
MR. PORTER answered that ANGDA reports through DOR and the
governor's position has not changed on that issue. The primary
goal [of the letter] is gas to market and in-state gas benefits.
Mr. Heinze brought forward the secondary issue of the Beaufort
Sea route as a future possibility and Senator Elton would have
to ask him what his intent was.
SENATOR ELTON said he didn't want anyone to suggest that the
Beaufort Sea alternative route might become possible if North
Slope gas was available to Alaskans. This sentence seems to him
to illustrate why the administration should be speaking to the
applicants with one voice.
MR. PORTER retorted that the administration is speaking with one
voice in its negotiations with the applicants.
SENATOR ELTON insisted that his point is that another state
entity is also speaking with one clear voice. "I want to make
sure the clear voices are saying the same thing."
CHAIR OGAN said Senator Elton's point is well taken and that he
shared his concern with the language mentioning the Beaufort Sea
route. He thought it sent mixed signals to the industry.
MR. HEINZE vouched that the application filed by the producers
clearly states that it is not route specific and proposes two
routes. That is what he was responding to. ANGDA would share the
first 530 miles of the first alternative, the highway route, and
something there might be beneficial to both projects. The second
alternative, the over-the-top route, is not abandoned in their
application.
SENATOR SEEKINS said he wasn't aware of anything in ANGDA that
says their CEO cannot communicate however he wants to.
CHAIR OGAN said he was correct and that it was a matter of
judgment.
SENATOR LINCOLN said the Legislature is expanding the
responsibilities of the Authority and she is uncomfortable
because she senses it does not have the complete blessing of the
administration. The current fiscal note is zero through 2010 and
the second paragraph says explicitly that to reduce duplication,
the state will coordinate research on all gas pipeline options
and provide ANGDA with any research it develops that may assist
ANGDA in the fulfillment of its obligations. There may also be
research that is appropriate for ANGDA to conduct and to provide
that information to the State of Alaska. She cautioned:
It doesn't sound to me that that coordination is there
and when we're talking about the Authority taking on
additional responsibilities of evaluation of
opportunities for private sector involvement in the
planning, development, construction, management and
operations of the gas transmission pipeline project, I
don't know how that can be a zero. And that report has
to come back to us within a year, before January of
'05 - that report including the new task we gave them
has to be before us in less than a year and yet we
still have a zero fiscal note.... I don't want the
Authority coming back and saying we don't need more
money because SB 271 gave us additional
responsibilities to handle....
CHAIR OGAN compared SB 271 to, "...putting our bait in the
water. We want to attract a strike."
If companies express an interest, he'd get the checkbook out and
write a check. However, they might not express interest and this
won't do anything. He asked Mr. Heinze if that was a fair
assessment.
MR. HEINZE replied that he has looked at the Authority's ability
under several different scenarios and the supplemental request
of $2.5 million will allow it to pursue any of the projects.
However, he doesn't have a good sense of how long the state will
pursue the stranded gas application process and said:
I'm happy at this point to leave it at a zero fiscal
note. I do not believe I could probably promise
Senator Lincoln that under all circumstances I
wouldn't need additional funding....
SENATOR LINCOLN said he was assuming that the Authority's $2.5
million request would be fully funded. If it isn't, she
suggested that he rethink his reply in regards to SB 271.
MR. HEINZE replied that if the funding situation changed
substantially, he would have to rethink the whole relevance of
the Authority and what SB 271 was asking ANGDA to do.
CHAIR OGAN said that SB 271 goes to Finance next and he hoped to
get it there so it could be considered along with the bill
requesting the supplemental funding.
MR. PORTER enlightened the committee with his explanation of the
indeterminate fiscal note saying that the key is to assume the
present law is fully funded and go from there. Some information
may become available to ANGDA in such a way that may save money
on the original plan; it could easily be a wash. "We do not
believe this will incrementally cost the state additional funds
at this present time."
CHAIR OGAN asked if he thought this was an important tool to
have - that may or may not work for this project.
MR. PORTER replied with a question. If proposition 3 didn't
exist and the Legislature decided to create an entity, what
responsibilities would it give it over Alaska gas? He thought
evaluating the TransCanada pipeline and how it complements their
mission was a fair use of ANGDA's time and he recommended
broadening their responsibility to include it.
SENATOR SEEKINS said proposition 3 passed because of frustration
over the lack of action and he encouraged every entity,
including ANGDA, to try to help the state and the Legislature
find ways to get the gas to market as economically and quickly
as possible.
SENATOR ELTON noted that the title of SB 271 gives ANGDA
authority to evaluate opportunities for private sector
involvement in the project, but page 2, line 13, says:
(C) to authorize as part of the Authority's
development planning, evaluation of opportunities for
private sector involvement in the planning,
development, construction, management, and operation
of the project.
He asked if this authority gives ANGDA a seat at the table as
the state evaluates the MidAmerica application that envisions
private sector involvement.
CHAIR OGAN pointed out that he was reading intent language.
SENATOR ELTON maintained that the lines he referenced
"authorized" ANGDA's participation in evaluation of private
sector involvement. He rephrased his question and asked if Mr.
Porter took this as a legislative directive to have ANGDA
involved at the table in the review of the MidAmerica
application.
MR. PORTER answered no.
MR. HEINZE further answered:
I felt that language was an instruction to the
Authority that we should include in any of our
thinking ways that private individuals and other
investors, frankly, could become involved in the
project if they wished in whatever we did.
CHAIR OGAN said he didn't have any problem with taking the
intent language out.
MR. PORTER expanded his answer saying it is not the intent to
have ANGDA sit at the table with the state in negotiating with
MidAmerica. However, he felt that both the state and the
Authority are committed to in-state gas benefits from local hire
and contracting, including participation in ownership of the
pipeline.
MR.HEINZE said he found the language in SB 271 helpful because
it added consideration of a special offering to Alaskans to
whatever ANGDA developed in the way of a funding plan.
SENATOR DYSON echoed Senator Seekins' comment about voter
frustration and wanting to see things move. He has respect for
Mr. Heinze and hears him saying ANGDA wants to be very useful in
collecting needed information to make informed decisions.
Expanding its ability to look at the possibility of a shared
portion of the pipeline is very useful.
MR. ROBERT VALDATTA, member of the Municipal Advisory Panel on
Stranded Gas, Seward, supported SB 271, because it would put
Alaskans to work.
SENATOR WAGONER moved to pass SB 271 from committee with
individual recommendations and attached fiscal note.
SENATOR ELTON objected saying, while he intends to vote for
passage of SB 271 and supports the $2.5 million request so the
state can have every tool it needs:
We have to carefully parse, kind of, the testimony
from the department whether they are supportive of
$2.5 million or how does this work with ANGDA. And,
while I agree that all the tools ought to be there, we
ought to have a good understanding of who is using the
tools and what the tools are meant to accomplish. And,
I'm not quite there, yet. So, I think that puts a
little bit of responsibility on the Department of
Revenue and on ANGDA to develop those protocols so
that we understand and we're comfortable with the
process - because I do believe that we are at a very
delicate stage right now. I don't want the left hand
not knowing what the right hand is doing as potential
contracts that are going to be presented to the whole
body, hopefully in a timely manner, come up.... I'm
going to be a no-rec on the bill. I think it's
important to move it forward so that we can keep some
momentum behind this.... It would sure be helpful if
we knew what those protocols were before we finally
vote.
CHAIR OGAN responded that his points are well taken. He has been
told that the state often sends a very mixed, and somewhat
dysfunctional, message to the market.
SENATOR ELTON removed his objection.
CHAIR OGAN announced that SB 271 passed from committee. There
being no further business to come before the committee, he
adjourned the meeting at 5:05 p.m.
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