Legislature(2007 - 2008)HOUSE FINANCE 519
05/01/2007 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB177 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 177 | TELECONFERENCED | |
HOUSE BILL NO. 177
"An Act relating to the Alaska Gasline Inducement Act;
establishing the Alaska Gasline Inducement Act matching
contribution fund; providing for an Alaska Gasline
Inducement Act coordinator; making conforming
amendments; and providing for an effective date."
Co-Chair Chenault pointed out an error in the previous CS to
HB 177.
Co-Chair Meyer MOVED to ADOPT the work draft to HB 177,
labeled 25-GH1060\O.
Representative Gara OBJECTED. He asked if the motion was to
adopt Version O in order to make the one change. Co-Chair
Chenault replied that it was.
Representative Gara WITHDREW his objection. There being NO
OBJECTION, it was so ordered.
FORMER GOVERNOR WALTER HICKEL testified in support of HB
177:
Our North Slope natural gas is Alaska's greatest
opportunity to guarantee the long-term viability of our
state. And Alaska is on the right course to make a gas
line a reality in this generation. It's a large project
and worthy of our great state. I am just back from
Moscow where I have been working with Russian leaders
on two other great projects. The opening of the
Northern Sea Route to the world - a decision that will
link the Pacific and the Atlantic oceans. It will be a
breakthrough of the same dimension as the Panama Canal.
The second great project is a tunnel beneath the Bering
Strait, linking the U.S. and Russia. Those who attended
the Conference last Tuesday in Moscow realize how
serious the Russians are about this visionary concept.
This link between the United States and Russia is going
to happen, and it's going to change the world.
Alaska's immediate opportunity is our North Slope
natural gas. And it is up to our Governor and this
legislature to make sure it is used for the maximum
benefit of our people, as mandated by our constitution.
Keep in mind that the people of Alaska. - the voters
who elected you - are the owners of this gas. You and
Governor Palm are the trustees of their inheritance,
won in our statehood battle and our Statehood Act.
The companies who hold Prudhoe Bay leases have
purchased the right to "produce" our gas. That's why we
call them the "producers." But they don't own the gas.
And they are required, through the leases they hold, to
sell our gas if they can earn a "reasonable profit. So
let's get started.
Governor Sarah Palm's plan is a good one. She has
thrown open the process to make sure that the State
finds the very best and most timely project. Her team
has designed legislation to put the needs of Alaskans
first. It means revenues for state government, gas for
our homes, gas for our businesses, and gas for our
remote villages that are in desperate need of
affordable energy.
It means making sure that the valuable gas liquids are
available for in-state processing to create high-paying
legacy jobs for generations of Alaskans. It means a
pipeline that encourages exploration by the producers
and by other companies, large or small, that believe
they can find more gas. Belief is the key to
prospecting and it is the key to life.
Believe me, we haven't begun to explore the natural gas
potential of our state. And we need a pipeline that
will accommodate the discoveries of those believers. In
my view, this does NOT mean shipping our gas through
Canada. Any Canadian route has to resolve First Nation
land claims, treaty problems, and a long, expensive
route, legal issues among competing Canadian interests,
and one bidder who wants to use our gas in the Alberta
tar sands to produce oil, an outrageous plan for
trillions of cubic feet of clean Alaska gas so needed
by our nation and the world.
In my view and in the view of the majority of Alaskans,
"maximum benefit" means an All Alaska Gasline from
Prudhoe to Valdez. It means a pipeline started sooner
and completed sooner. It means an energy source for our
villages and cities. It means feedstock for value-added
industries and jobs in Alaska.
We addressed the same issue in the 1960's and 70's on
the North Slope oil. We had to force the oil companies
to drill at Prudhoe Bay. When I was elected Governor in
1966, BP had already given up. So had all the others
except Atlantic Richfield. In early 1967, I flew to
Prudhoe to meet with their head geologist Harry Jamison
and he announced that they, too, were going to pull
out. I said, "If you don't drill, I will."
In 1968, that rig discovered the biggest oil field in
the history of North America. But two years later as
Interior Secretary, I had to take Exxon to the mat, or
there wouldn't have been a trans-Alaska oil pipeline.
Now we have another Governor who is ready to stand up
and do what has to be done. And the people are behind
her. Ladies and gentlemen of the State Legislature,
this is your moment to step forward and stand with her.
The people of Alaska want a gas line now. Together you
can make history, and Alaska will long remember this
generation of leadership.
1:59:00 PM
Representative Gara thanked Governor Hickel for supporting
early efforts toward having a gas pipeline.
DAVID GOTTSTEIN, CO-CHAIR, BACKBONE, spoke in support of HB
177. He related that he and Former Governor Walter Hickel,
Co-Chair the group Backbone. He thanked the committee for
their efforts in working through the details of AGIA. He
focused on the broad issues that sometimes get lost in the
detail:
Backbone is in support of AGIA and its major components
because it provides for a competitive process, creates
material incentives, and attempts to provide for the
maximum benefit to the residents of Alaska. Even a
recent Dittman poll indicates that the public, by more
than two to one, believe the $500 million incentive
package is worthwhile.
My biggest caution to you today is to be very, very
careful as to whom you listen to. What we know
undeniably is that the representatives of the North
Slope producers are paid to persuade and convince you
that what is good for them is good for the State. It is
simply paid advertising without any checks and
balances. As a result, much of what they say must be
challenged.
Let me offer some examples. They say that only the
producers are capable of financing and building a
pipeline of this magnitude. That couldn't be further
from the truth, and we trust that Alaska's leaders are
smart enough not to believe it.
Even if the likes of TransCanada, Mid-America and
Sempra weren't already at our doorsteps, each fully
capable and experienced enough to bring the appropriate
parties to the table with bona-fida bids, the private
equity markets alone have over a trillion, yes that is
a trillion dollars of money under management constantly
looking for deals. And with the forecasted price of gas
and the Federal loan guarantees, they, along with the
investment banking community will be chomping at the
bit to get a piece of such an investment grade
investment opportunity. So don't let the producer's
spin doctors convince you otherwise. The only thing
that is necessary to get a pipeline financed and going
is access to a sufficient quantity of gas to make it
economical. Point Thomson and our royalty gas alone,
does that.
In football it's touchdowns, in baseball it's runs, in
the North Slope producers attempt to control the
process, maintain a monopoly grip, and own the
pipeline, it's propaganda and influence peddling. This
is a standard practice all over the world when it comes
to big companies and big profit opportunities. If they
can't control it, they want to stop the process, or at
least slow it down as much as possible.
Let's dispel another fabrication; that AGIA's process
is an exclusive one. As I read it, it is come one come
all, and is not exclusive at all. The main beauty of
AGIA is that it is a defined competitive process that
will result in a pipeline sooner rather than later. It
will provide more to our residents, as it will attract
a more vibrant bidding pool that by definition will
require more from the winning, bidding participants.
AGIA doesn't preclude the chosen licensee from
enriching their pipeline proposal by adding additional
participants and aspects after a successful bid, as
long as it doesn't mean less to the State.
The State has so much at stake, and is in a powerful
position to choose what is in the best interests of our
state, that it would be a shame to abdicate that in
favor of what is truly an exclusive, non-competitive
process of dealing just with the producers, just
because the foxes say they know what is best for the
henhouse.
Do we really want to repeat the mistake of putting our
fiscal future in the hands of those with a long and
proven history of overcharging on the oil pipeline, and
only paying up when the court of last resort rules so,
or after a successful negotiation for a fraction of the
dollars at stake, as a result of a political
settlement? Can we really take what the producers say
seriously when they won't even attempt to engage in any
truly honest and meaningful dialogue?
But it gets worse. They keep saying they own the gas.
They don't. They have strong economic rights to produce
the gas conditioned upon certain performance
requirements. All you have to do is reference our
constitution and the Mineral Leasing Act setting forth
our rights and obligations to understand that.
The sincerity in which these hyperboles are put forward
has me believe that the presenters believe it, because
their bosses want them to believe it. When in fact, we
own the resources, and when our tenant violates the
lease, we not only have a right, but a duty to wrestle
control back of our vast gas resources and make them
available to a hungry nation.
But there's more; the North Slope producers, through a
slight of hand amendment gimmickry, are attempting to
accomplish with amendments what they are failing to
accomplish with their aforementioned propaganda, by
asking you to provide for non-conforming bids and or to
require their upstream participation. This would put
them right back in control of our destiny.
I think your esteemed colleague Representative Doogan
might have said it best about the producer's attempt to
build a pipeline when he said, "If they wanted to build
one, they'd be building one. They are immensely
profitable companies. The federal government is
offering loan guarantees. And they control the most
important chips in the entire game, the North Slope gas
that makes a pipeline possible. They have everything
they need to build a pipeline. They aren't building
one. The only logical conclusion is that they don't
want to build one."
I believe Representative Doogan is right, or at least
the three producers won't be able to get together and
agree to a project to more forward anytime in the
foreseeable future. The North Slope producers were
offered everything imaginable under the Stranded Gas
Act, and still chose defiance. The people spoke in the
last election, recognizing the Murkowski plan
represented a huge giveaway. Why should we think if we
offer them less, that they will do more now?
We are in a game of chicken with the North Slope
producers, and we lose if we don't have the backbone to
secure access to our gas and offer it in a free market
and open process. The nanosecond that a line is
approved, I believe the producers will participate,
rather than being left out of one of the biggest
investment opportunities in U.S. history, risk losing
their leases due to obvious non-performance, or face
the wrath of Congress for their intransigence. We urge
you to limit amendments to ones that increase the
likelihood of a successful open season process, rather
than ones that tilt in favor of producer control.
The sad thing is that the corporate heads of the North
Slope producers are spending all their time trying to
lean us back to their own exclusive sole-source
process, instead of trying to be competitive. They are
gambling that propaganda is a cheaper way to get what
they want than the cost of being competitive. In a time
when our legislative and public processes are subject
to heightened federal judicial scrutiny due to the
potential of conflicts of interest, let's prove them
wrong. Let's pass AGIA with the few meaningful
amendments that, in your wisdom, will increase the
chances of a good pipeline route sooner than later.
Don't force a special session, and thereby increase the
risk of failure to act.
No one in the world gets fiscal certainty. If we were
to go to the North Slope producers and demand fiscal
certainty, and say, for example, if you build a
pipeline and own it, we absolutely need the value of
$70 per barrel no matter what the value in the market,
they would laugh at us. There is no such thing as
fiscal certainty. It's just another ploy on their part
to control the mechanism.
2:07:51 PM
DAVID VAN TUYL, GAS COMMERCIALIZATION MANAGER, BP
EXPLORATION-ALASKA, referred to a handout entitled "Alaska
Natural Gas Pipeline Project - Testimony on AGIA" (copy on
file.) He addressed Slide 2 - the opportunity and
challenge: BP wants and needs a gas pipeline. The pipeline
should be built for a low capital cost and to be operated
cost efficiently. Low costs would provide incentive for
further exploration. The gas project would extend the oil
production life in Alaska. The project remains commercially
challenged.
2:11:51 PM
Mr. Van Tuyl referred to Slide 3 - BP Disagrees with
Administration's Economics. He voiced concern that the
administration's economic analysis is misleading. He
maintained that the project is not wildly profitable. Firm
commitments must be accounted for in project economics. The
upstream pays for the midstream. Long-term cash generation
is highly important. There is a need for a common
understanding of the project to determine the best way
forward.
Representative Gara questioned if Mr. Van Tuyl is referring
to an analysis by Econ One last year. Mr. Van Tuyl said he
was referring to that analysis.
Mr. Van Tuyl continued to explain that without firm
transportation (FT) commitments, a binding legal obligation,
there is no project. The core issue is whether the
commitments require the producer to absorb the risk. He
emphasized that long-term cash flow is highly important.
The FT commitments need to be for well beyond 10 years.
2:18:35 PM
Mr. Van Tuyl delved into what is so important about FT -
Slide 4. Firm transportation commitments by resource owners
are needed for a gas pipeline company to get financing. FT
is a binding financial obligation. FT requires multi-
billion dollar commitments by resource owners. Long-term
commitments represent real risk. The two risks are price
risk and supply risk and are borne by those making the
commitment.
Mr. Van Tuyl addressed Slide 5 - Project Risk Resides with
the Resource Owners. He detailed the various risks
depicted: price, fiscal, production, toll, fiscal schedule,
cost, and finance. All risks are either borne directly by
the resource owners or passed to them via the market or
toll. Those bearing a risk are commercially motivated to
manage that risk.
2:24:42 PM
Mr. Van Tuyl turned to AGIA - Slide 6. He maintained that
AGIA needs significant modification to result in a
successful project. As drafted, BP will not be able to
submit a bid that conforms to the requirements under AGIA.
As drafted, it is difficult to envision circumstances that
would allow BP to make a firm transportation commitment to a
licensed project under AGIA. The negotiated rate protection
is unavailable upon expansion. Subsidization of competitors
is commercially unreasonable. Resource terms are
insufficient to justify FT commitment. BP intends to bid if
AGIA is appropriately modified.
Mr. Van Tuyl listed Key Concerns Preventing BP Bid Under
AGIA - Slide 7. He listed sections of the bill that have
problems for BP. Slide 8 continues the list of unacceptable
conditions in HB 177.
2:32:32 PM
Mr. Van Tuyl discussed Slide 9 - How AGIA can help deliver a
successful project: address areas of key concern listed on
prior slides, allow applicants to respond to the state's
objectives, avoid exclusivity to ensure a pipeline gets
built, address fiscal terms to encourage FT commitments
needed for a successful project, and allow due process of
appeal, remove potential Order 2004 conflict, and other
clarifying edits.
2:34:33 PM
Mr. Van Tuyl communicated BP's Vision for Alaska - Slide 10.
He related BP's long history in Alaska and looked into a 50-
year future, which is only possible with a gas pipeline. BP
wants to bid under AGIA and hopes it will be modified
appropriately.
Mr. Van Tuyl discussed What a Successful Gasline Means -
Slide 11. It means jobs for Alaskans, additional revenue
for future generations, increased economic activity, and new
businesses created. It also means a long-term gas supply
opportunity for Alaskans and a more diversified economy for
decades.
Co-Chair Chenault asked if BP would submit a bid that does
not conform to AGIA. Mr. Van Tuyl said BP would like to
work within the framework of AGIA.
2:38:45 PM
Representative Gara asked about other subsidies that benefit
BP. He questioned BP's role as a gas developer and the
relation to last year's PPT break. Mr. Van Tuyl asked if
midstream costs are what Representative Gara is referring
to. He voiced concern about the tax rate of 22.5 percent.
Representative Gara said he is talking about upstream field
development costs. The producer is allowed a 22.5 percent
deduction of all gas field development costs from oil taxes,
and a credit for upstream costs. According to Econ One,
whoever owns Point Thomson would have to pay about $3
billion to develop, with the state paying about $1 billion
of that amount. Mr. Van Tuyl said any upstream field
investments would be included. Prudhoe Bay is already
developed; Point Thomson would apply.
Representative Gara wondered about rolled-in rates as a
subsidy. Mr. Van Tuyl said AGIA could result in higher
shipping rates for initial shippers. It does reference 15
percent, but the mechanics of how that language works
doesn't limit the increase of the initial shippers to 15
percent. It depends on the rate the very first day of
production. The Federal Energy Regulatory Commission (FERC)
said if the initial rate goes down as a result of the roll-
in, that is not a subsidy. BP suggests that FERC be allowed
to adjudicate rates.
Representative Gara asked if BP accepts rolled-in rates such
as are done in Canada. Mr. Van Tuyl reported that rolled-in
rates are the norm and not the concern. If the rolled-in
rates result in a subsidy, that is of concern.
Representative Gara gave a hypothetical example. Mr. Van
Tuyl said that is the regulation in Canada; however, in the
United States FERC adjudicates rates.
2:45:47 PM
RON BRINTNELL, ALASKA GAS PROJECT MANAGER, ENBRIDGE,
provided a handout entitled, "Alaska Natural Gas Pipeline"
(copy on file.) He shared background information about
Enbridge. He maintained that Alaska gas is needed and
expediency is important and real progress needs to be made.
He commented on the market window and degradation of the
market window. He noted that the demand for oil and gas
continues to grow. He stressed that volatility is an issue.
Mr. Brintnell began his slide overview. He noted on Slide 2
that Enbridge is an international company that has grown
steadily with 50,000 miles of pipelines. Enbridge owns and
operates the world's longest liquid petroleum pipeline, and
delivers 70 percent of WCSB crude oil. He highlighted areas
served by Enbridge lines. Mr. Brintnell noted transmission
lines deep in the Gulf of Mexico. They own and operate in
Inuvik, which has taught them about Arctic conditions.
Mr. Brintnell turned to Slide 3 - Unparalleled Experience in
Recent Pipeline Development. He observed that Enbridge is
one of the global 100 most sustainable corporations in the
world. He noted that they will have $15 billion worth of
pipeline projects over the next 10 years. These projects
will provide unmatched experience in managing labor,
construction, procurement, environmental, regulatory and
cost-control challenges. He stressed support for local
hiring. He noted that pipeline construction has changed in
the last 5 - 10 years. He maintained that the market has
changed with Enron and now there is more regulatory
oversight. Utilities no longer play a large role in project
development. He reported that Enbridge is currently working
with FERC and the National Energy Board coordinating all of
the cross border permits. Enbridge is also working with
environmental groups, as well as with Canadian First Nations
and the Lower 48 Indian Bands.
2:56:26 PM
Mr. Brintnell noted that they are working with a number of
groups and have first-hand knowledge to face the challenges
proposed by the Alaska gas pipeline.
Mr. Brintnell spoke to the Alliance pipeline - Slide 4. He
noted that it was the brainchild of producers. Enbridge was
a small part of the initial project. Producers wanted to
understand the costs and risks and concluded that they did
not need to be part of the pipeline ownership.
Mr. Brintnell referred to statements regarding Moving the
Project Forward Requires Producer Alignment - Slide 5. He
addressed the statement "no producers - no pipelines". He
argued that North Slope producers are in the best position
to assume the risk and make shipping commitments.
2:59:48 PM
In response to a question by Representative Gara, Mr.
Brintnell noted that if no one steps up to be the shippers,
there is no pipeline. He did not feel it would be necessary
for the producers to own the pipeline, but acknowledged that
it would make sense for them to want to.
Mr. Brintnell stressed that Enbridge wants to be part of a
consortium and believes that they can add value to the
project. They will not submit an application under AGIA.
The project is too risky for Enbridge without the producers.
Mr. Brintnell observed that there is a relatively small
group of pipeline companies. He maintained that when the
numbers add up, the gas will flow. Economics will result in
commitments. He stressed that potential buyers of Alaska
gas have heard for a long time that a project was geared up,
which did not occur. He concluded that this causes
uncertainty.
3:04:11 PM
Co-Chair Meyer questioned how much time the state would have
to develop the gas. Mr. Brintnell noted that it would take
at least a couple of years for the producers to come to open
season. He expressed concern with potential hurricanes in
the Gulf. Co-Chair Meyer questioned the viability of
alternative supplies such as coal. Mr. Brintnell noted that
environmental issues are a concern, but emphasized that
companies will find a way to be competitive.
Mr. Brintnell discussed Slide 6 - Moving the Project
Forward; Don't Just Focus On the Pipeline. He acknowledged
the work of the Governor, but expressed concern with the way
AGIA is drafted. He noted that the major focus is on the
pipeline, not on the producer/shipper.
Mr. Brintnell spoke to legislation. He compared discussions
on AGIA to trying to discuss a bill and noted that language
must be drafted before a bill can be heard. He concluded
that AGIA adds unnecessary regulatory complexity with
respect to rolled-in rates.
3:09:33 PM
Mr. Brintnell addressed shipping commitments. When a
utility commits to a supply of gas, they are committing
their customers. In 15-20 years the costs may increase for
the "moms and dads" due to the addition of other shippers.
3:11:14 PM
In response to a question by Representative Gara, Mr.
Brintnell noted that the risk is the same for vintage
pipelines in Canada. Newer lines have negotiated tariffs.
He acknowledged that rates move, but explained that they are
capped. The National Energy Board prefers negotiated rates.
Representative Gara clarified that the rates can go up at
the end of the 15-year period. Mr. Brintnell explained that
after 15 years, shippers would be solicited.
Co-Chair Chenault summarized that current shippers would
have to renegotiate after 15 years. Mr. Brintnell explained
that current shippers in the Alliance pipeline could extend
the contract, at the same rates, but if they do not, new
rates could be negotiated.
3:14:12 PM
Representative Kelly observed that FERC left Alaska with an
ambiguous rolled-in rate. He argued that the 15 percent
would be a bonus. Mr. Brintnell explained that there is a
presumption of rolled-in, but that shippers would have to go
to the regulators to go up without a rebuttal assumption.
As AGIA is written, original shippers would have to agree to
the rate increase; there is no rebuttal. Representative
Kelly pointed out that they would be in nominal dollars.
Representative Gara summarized that the old pipeline system
utilizes rolled-in rates; under the new system, negotiated
rates are allowed. Mr. Brintnell expected that negotiations
with customers would occur at the end of the 15 years. If
vintage pipelines are expanded, then rolled-in rates would
occur. The Alliance pipeline would be competitive.
Representative Gara concluded that the Alliance pipeline has
a negotiated rate, which could result in a loss of their
suppliers.
3:19:21 PM
Mr. Brintnell discussed Slide 7 - Moving the Project
Forward. He voiced concern about Section 43.90.130,
Application requirements, on page 3 of the bill. Enbridge
does not understand why the legislature would want to create
a process that might stymie innovation and result in the
best project not moving forward.
Mr. Brintnell noted that Enbridge competes on a day-to-day
basis in a variety of manners. He maintained that
competition would result in more money to the state. He
stressed that there might be different options that would
provide as good of results, but that AGIA does not allow
alternatives. He provided an analogy.
3:23:09 PM
Mr. Brintnell turned to Slide 8 - Canadian Oil Sands
Development Valuable Lessons. He observed that the
potential could be huge in Alaska, but there has to be a
pipeline. He referred to the Canadian Oil Sands Development
in Alberta for valuable lessons. He did not think the
Alaskan project would succeed in its current form.
Mr. Brintnell highlighted Slide 9 - Moving the Project
Forward; Understanding What Is Achievable. He stressed that
it might seem reasonable that the shippers would turn up,
but that they feel it is a risky venture. Shipping
commitments will have conditions. He did not think it was
reasonable to get unconditional commitments to build the
project.
3:26:19 PM
Mr. Brintnell pointed to Slide 10 - Moving the Project
Forward - Understand Canada. He stressed that no company
has the exclusive right to build a pipeline to ship Alaskan
gas in Canada. The market should decide who develops the
Canadian portion of the line. He referred to a document
that is Enbridge's assessment of issues pertaining to the
Canadian portion of the Alaska pipeline (copy on file.)
Representative Gara asked if there would be rolled-in rates
if the Alaska pipeline goes through Canada. Mr. Brintnell
did not think there would be rolled-in rates; the National
Energy Board (NEB) prefers negotiated settlements. NEB
would have to look at the proposed shipping agreements and
expansions.
3:29:07 PM
Representative Crawford observed that the difference between
the existing and new pipelines is competition. In Alaska,
there will be no competition. He suggested that there
should be some protections for new explorers. Mr. Brintnell
observed that pipeline development was considerably
different 30 years ago in Canada. He referred to a recent
pipeline to show an example of competition. He stressed the
need to get the pipeline going first.
Representative Crawford stated that his goal would be to
have action in Prudhoe Bay. In Louisiana, producers can no
longer own the pipelines. He maintained that competition
works.
3:34:13 PM
Mr. Brintnell reiterated that the best people to make a
pipeline flow are the shippers. He acknowledged that they
may not remain in the long-term. He added that FERC and the
National Energy Board have stronger controls than they did
30 years ago. The rolled-in rate issue is not a
preferential treatment. The issue is should the shipper
have to pay more for someone to come in later.
3:35:50 PM
Representative Crawford questioned if smaller producers come
to the table and commit to the pipeline, would they not
benefit. Mr. Brintnell acknowledged that they would
benefit, but stressed that no one would benefit if there is
not a project.
Representative Gara concluded that the rolled-in rates are a
battle between the shippers and owners and have more to do
with the economics of the pipeline. Mr. Brintnell spoke
from a shipper's perspective and stressed that it is was not
fair.
Representative Gara noted that the fear is that if rolled-in
rates are used, the tariff would raise to such a point that
no new shippers would come in. Mr. Brintnell agreed, but
stated that he could not speak for a future shipper. He
pointed out that the initial shippers are being asked to
bear risk for a future shipper.
3:40:37 PM
Mr. Brintnell spoke to Slide 11 - Understand Canada. He
listed the five principals that Canada would apply to all
pipeline decisions: the market will decide; decisions must
be supportive of a modern regulatory regime; there must be a
project management approach; pipelines must support
Aboriginal economic development; and the decisions must
ensure that Canadian benefits are realized. There must be
more benefits than costs.
Mr. Brintnell concluded with Slide 12 - Final thoughts. He
said that Enbridge believes that outstanding fiscal issues
are the "elephant in the living room". He maintained that
an unconditional commitment is not achievable. He stressed
that creativity must be allowed; innovation drives the
market place. Government financial assistance is not
essential. The government can achieve key goals without
adding to the regulatory process. He maintained that Canada
will be ready for the project. He urged Alaska not to put
in place regulations that are all about process.
3:45:36 PM
Representative Gara spoke to "must haves" contained in the
legislation. He did not feel that any of them were onerous.
Mr. Brintnell stated that the rolled-in rate is a large
issue. Open season is another. He did not think that there
would be a binding open season. Typically there would be
discussions with shippers before a binding open season
occurred. He further noted that the 10% tax issue is not a
pipeliner's issue, unless the producers are not the
shippers.
3:49:01 PM
Representative Gara countered that open season is necessary.
Mr. Brintnell addressed the economics from a shipper's
perspective. He further noted that the only way to resolve
the issue is to negotiate with the producers. He said that
AGIA language is not acceptable to producers right now. He
underlined the importance of further discussions with the
producer.
Representative Kelly summed up the testimony by saying that
the state can wait and the producers will come. Or, the
legislature can support the governor's proposal. He further
noted that he felt the "must haves" outlined in AGIA are
reasonable. He asked Mr. Brintnell his opinion on which
direction the legislature should go.
3:55:15 PM
Mr. Brintnell said he thought Alaska should not give up on
negotiations. He recommended that AGIA be modified to
provide for flexibility. He went on to say the way AGIA is
written now, Enbridge's application would not abide by what
is outlined in AGIA.
Representative Gara asked if, when looking at profit margins
in gas development, producing gas would be a profitable
venture.
Mr. Brintnell said he could not speak for producers as he is
not one. He said he believes that the producers do want to
move the project forward. He concluded that he is defending
the producers because Enbridge wants this project to move
forward.
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