Legislature(2007 - 2008)HOUSE FINANCE 519
05/09/2007 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 | |
| + | 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."
Vice Chair Stoltze MOVED to ADOPT the work draft for HB 177,
labeled 25-GH1060\V, Bullock, 5/9/07. There being NO
OBJECTION, it was so ordered.
Representative Gara asked which draft is before the
committee. Co-Chair Chenault said it is the latest draft
the administration has brought forward.
2:15:52 PM
MARCIA DAVIS, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
REVENUE, made a comparison of the old House Resources CS,
version O, and the new House Finance CS, version V. Ms.
Davis referred to a minor change on the bottom of page 1 of
version V. "To ship" was a correction because a producer
commits to ship gas to a gas pipeline system.
Co-Chair Chenault introduced Commissioner Galvin and Deputy
Commissioner Marty Rutherford.
PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, addressed
the changes in the new CS, version V.
Ms. Davis noted legislative legal drafting changes on page
2. She explained a change in Sec. 43.90.110 (1) (C) that
relates to the manner in which the state provides matching
funds of up to $500 million. It defines what qualified
expenditures are. There has been some broadening of what a
qualified expense can be. Previously it had to relate to
the obtaining of the FERC or RCA certificate. It is now
recognized that there are other permits and requirements
that would qualify.
2:23:28 PM
Ms. Davis pointed to drafting changes on page 3. She listed
items that would not qualify, such as expenditures for work
product or assets that have be acquired or developed by the
licensee before the license is issued. Sec. 43.90.130 (2)
deals with a word change from "detailed" to "thorough" to
better comply with a FERC standard.
Ms. Davis explained that on page 4, subsections (C) and (D)
contain edits from legislative legal. The word "thorough"
in subsection (i) was again changed from "detailed". Page 5
includes a listing of all items that must be included in an
application. In subsection (3) (B) is an important addition
which was included as a result of concerns expressed by
Trans Canada regarding pre-filing procedures before FERC.
2:26:01 PM
Ms. Davis acknowledged drafting changes on page 8. She
pointed to subsection (8), where a change is needed from the
word "owned" to "used". Commissioner Galvin clarified that
the V version contains this change. Ms. Davis referred to
page 9 and the addition in subsection (16) of "rejection of
an application as incomplete, the". She explained that this
is the provision that requires an applicant to waive the
right to file legal challenges against the application
process. The new wording narrows the focus. The waiver
does not affect a party that is not an applicant.
Ms. Davis turned to page 10, subsection (20). It deals with
an applicant's financial and technical ability, as well as
with the applicant's safety, health, and environmental
compliance. Representative Hawker asked if the word
"detailed" belongs in the section. Ms. Davis explained it
is used in a different way here and is acceptable.
2:31:04 PM
Ms. Davis spoke to Sec. 43.90.140, regarding the process
being fair to applicants. All applications will remain
unopened until a specific date. There is a short period of
time in which requests for additional information are made,
but no one can resubmit or change information. Subsection
(e) was added to make clear that once the applications come
in they are available to the legislature including complete
and incomplete applications.
Ms. Davis explained that Sec. 43.90.150 removes a definition
of "proprietary or trade secret" and places it elsewhere.
Previously all information of a winning applicant would be
made public. Now, confidential information will remain
confidential.
2:34:56 PM
Ms. Davis discussed Sec. 43.90.160, which provides for
public review and comment. Subsection (c) adds a phrase
"when the commissioners determine the applications are
complete", and allows the legislature and their agents and
contractors, to see confidential information. Representative
Joule asked a question about the word "when" in the O
version of the bill, which changed to "after" in the V
version. Ms. Davis thought it was a drafting preference.
2:37:15 PM
Ms. Davis turned to page 12, which shows the deletion of a
phrase. Representative Hawker agreed with the deletion and
surmised that the language was put there by one of the
potential applicants. Commissioner Galvin responded that
the language was put there by a legislator based on
testimony from the Port Authority. The department disagreed
with the amendment because of its questionable value to the
state. The language muddied the water.
2:39:52 PM
Ms. Davis said page 13 has legal corrections and drafting
preferences. Sec. 43.90.190 changes the time period of 60
days to 90 days for the legislature to approve the issuance
of a license. Co-Chair Chenault thought 90 days was enough
time for the legislature to consider all of the bids because
there is time during the public process to evaluate them.
2:42:09 PM
Ms. Davis turned to Sec. 43.90.200, the timeline obligations
on the part of the applicant having received a FERC
certificate. She talked about subsection (a), which
describes when the applicant should accept the certificate.
In version O there was a provision that the applicant had to
accept the certificate after exhausting administrative
rights of appeal. In the V version, the reference to
"administrative" was removed, and "or earlier at the
licensee's discretion" was added. Subsection (c) on page 15
contains a change which gives the licensee two years after
the effective date of the certificate or 5 years after open
season to get credit support. Subsection (f) references
when a FERC certificate is in effect.
Ms. Davis addressed Sec. 43.90.210 and a change on page 16.
What has been inserted is an exception for when a
modification or amendment is required because of an order or
requirement of a regulatory agency with jurisdiction over
the project. Previously, it required if any modification
in any way diminished the net present value of the project
to the state, it resulted in the state's inability to grant
or authorize that modification. "Net present" was deleted
in front of value because there are other less restrictive
terms.
Commissioner Galvin added that this change was not picked up
in Version V and would have to be corrected.
2:47:00 PM
Representative Hawker emphasized that he had previously
raised these concerns and they were his own, not the
industry's. He emphasized that he has spoken with no one
about this language. He related that he is a fan of AOGCC
as a checks and balance system. He voiced concern with
language that puts side bars on AOGCC.
2:51:13 PM
Commissioner Galvin agreed with Representative Hawker's
concerns. The language in this section is not intended to
put any restrictions on AOGCC. A decision made by AOGCC
that ends up making a licensee change a project can be
accommodated by the commissioners. It is intended to ensure
independence by AOGCC. Representative Hawker agreed that is
the intent, but thought the words did not allow for that.
Ms. Davis read the paragraph as it is intended to flow. The
second sentence clarifies that orders or requirements of a
regulatory agency take priority. Representative Hawker
summarized his understanding of the section. He suggested a
word change.
2:58:23 PM
Representative Gara wanted to ensure AOGCC's authority is
what it should be. He gave an example. Commissioner Galvin
said that the department recognizes the potential problem
with AOGCC's off take rate. The administration has put
forth a request for clarification on off take rate issues.
Representative Hawker concluded that the language in Sec.
43.90.110 does accomplish the intended purpose.
3:02:26 PM
Ms. Davis explained that Sec. 43.90.220 gives the state its
right to audit the records of a licensee and to participate
in the governing bodies associated with the project as it
proceeds. Subsection (c) deals with ensuring that the
commissioners have the right to attend the governing body or
bodies and receive relevant notices and information. She
referred to the top of page 17 and related an important
change that deals with not disclosing sensitive information.
Ms. Davis addressed Sec. 43.90.230, the license violation
section. Subsections (1) and (2) and (3) list when the
licensee is in violation of the license. Subsection (4) was
added to clarify the consequences of failure to accept a
certificate.
3:06:00 PM
Representative Kelly asked about Sec. 43l.90.210 where
AOGCC's order could result in the project's success being
diminished. He wanted assurance that under girding all of
that was commissioner approval. Commissioner Galvin assured
him it was so.
Ms. Davis said the changes on page 18 are style changes.
The change on page 19 is substantive and addresses a
concern. In dealing with abandonment of project, subsection
(c) is the definition that an arbitrator would use to
determine whether or not a project was uneconomic.
Subsection (1) adds other "external" sources of financing at
the request of the producers. Representative Hawker noted
it is protection for any large company. Ms. Davis said that
is correct. In response to a question by Representative
Hawker, Ms. Davis said it does provide credit support if
there are firm transportation commitments. Representative
Hawker opined that "external" was problematic. Ms. Davis
commented that "if the economics determine that they should
be shipping, they won't be able to prove up element two."
3:10:08 PM
Ms. Davis turned to subsection (e). There was a deletion of
a provision in the O version that talks about reimbursement
to a successful licensee who has established that the
project is not economic. The reimbursement by the state to
such a licensee would have been for 50 percent of all
qualified expenditures. In Version V this amount was
increased to all qualified expenditures.
Ms. Davis turned to deletions in Sec. 43.90.250 as shown on
page 20. The deletions relate to what the AGIA coordinator
is entitled to receive.
Sec. 43.90.260, on page 21, addresses royalty inducements.
In subsection (C) a reference to gas processing was move
into another section. On page 22 in version O, a provision
that provided for a royalty in kind, royalty in value,
election option that the shipper or resource owner that
makes a commitment for capacity in the first finding open
season would have a right to elect to. They could elect to
require the state to take its gas in value. In turn, the
entity would agree to sell part of its gas instate, but
under terms that were equivalent to the value price that the
state would be receiving for its gas outside. The royalty
experts worked on this and found many problems. She
highlighted various problems with the mechanism. The
language for that provision was deleted.
3:14:55 PM
Ms. Davis drew attention to page 22, subsection (B)(2),
language which provides more detail and binders on what the
state needs to do with respect to ensuring that when it
makes its election for taking gas in kind, that it doesn't
create an undue burden on producers relative to their
transportation costs. It was set forth as an earlier
direction to the Commissioner of Natural Resources, that
they not impact transportation unduly and that they give
ample notice. This provision provides more detail about the
first point.
Representative Gara asked about the change on page 22,
whether it impairs the state's ability to switch between
royalty in value or royalty in kind. Ms. Davis said it does
not. Commissioner Galvin said it indicates a change in the
timing. The state may choose not to make a switch. There
is a value to it and that's why it is being offered as an
inducement.
3:17:13 PM
Representative Kelly asked what the state's prerogative in
the agreement is. Commissioner Galvin explained that there
are parameters surrounding the state's ability to switch.
The intent is to preserve the ability to switch, recognizing
that costs and risks are associated with that. It's limited
to only the gas committed in open season. Through the
structure of leases and regulations will be protection to
ensure compliance. Representative Kelly summarized that the
existing lease mechanisms are in place until a mutually
acceptable agreement replaces them. Commissioner Galvin
clarified the structure. The terms of the leases will
remain until regulations are updated, then the licensee
would have the option of taking the new language. There
will always be a contract in place. Ms. Davis referred to a
new subsection (d) on page 24, which is to clarify the
definition of gas production tax.
3:21:40 PM
Ms. Davis discussed Sec. 43.90.330, inducement vouchers. A
new subsection (d) was added to give it a parallel structure
to the requirements that are imposed on resource owners
relative to receiving these types of benefits for royalty
and tax benefits. It sets up a mechanism whereby the owners
agree not to oppose the rolled-in rate structures. The
correction on the bottom of page 25 was from legislative
legal and the attorney general's office.
Ms. Davis noted that on page 26, Sec. 43.90.420 clarifies
that constitutional claims by third parties would proceed
under existing administrative procedures. Representative
Gara asked if the intention is to have a 90-day statute of
limitations for challenging the statute on constitutional
grounds. Ms. Davis explained that 90-day limit is for
constitutionality challenges for the chapter, the statute,
as well as for the issuance of a license. Commissioner
Galvin noted that statutory or administrative appeals of the
decision could also occur. Ordinary citizens may want to
challenge. Administrative appeals would occur 30 days from
the date of the decision. Constitutional appeals do not
generally have a timeframe. The provision would provide a
timeframe for constitutional appeals.
3:25:15 PM
Representative Gara asked if there is a limit to the appeal
period. He gave an example. Commissioner Galvin reiterated
that statutory challenges to an agency decision are limited
to the 30-day time period. He referred to a similar
decision in Point Thomson. The court dismissed the appeal
and noted that it needed to go through an administrative
appeal process, which is limited to the 30-day period.
Representative Gara continued to explain that conduct can be
challenged that is not covered by the statutory time period.
He wanted further assurances that challenges could not occur
years from the decision. Commissioner Galvin noted that the
provision has been well reviewed. The administration wants
to limit and expedite review of an action against a
licensing process. The decision would be subject to the 30-
day challenge for statutory purposes and on constitutional
basis, it would be 90 days.
3:29:07 PM
Representative Gara summarized that if it is not a
constitutional challenge it would be subject to the
Administrative Procedures Act. He suggested the 90-day
limit be tied to the constitutionality of the chapter or the
legality or constitutionality of a license. Commissioner
Galvin further explained that the concern was that doing so
would mean an additional 90-day wait. He added that he felt
comfortable with the current approach.
Representative Gara wanted 100 percent assurance that the
30-day limit would apply. Commissioner Galvin assured
Representative Gara that he would recheck it with the
Department of Law.
3:32:10 PM
Ms. Davis said the bottom of page 26 was an important
addition which deals with the state's commitment to provide
assurance to the licensee that it would be supported and not
have to compete with a competing natural gas pipeline. If
for any reason the state does deviate and support a
competitor's project through tax, royalty, or monetary
treatment, if it makes that payment as a result of that
violation, that payment will be considered in full
satisfaction of all claims a licensee would have that arise
out of that conduct by the state.
Ms. Davis explained that royalty and tax are purely royalty
and tax. Other types of permitting are not preferential, so
language was removed to that effect. Added is subsection
(3) to make it clear that anything the state does with
respect to reviewing, processing, facilitating permits,
rights of ways and authorizations for a competing natural
gas pipeline, does not invoke the provisions of this project
assurance clause. This provision addresses industry
concerns that the state could not support other projects.
3:34:25 PM
Ms. Davis noted that on page 28, a definition section is
added. The definition of "amended certificate" intends that
someone does not get a certificate after the passage of the
license and creates extended deadlines. A definition of
"applicant" was added for clarity. A definition of "gas
treatment plant" was added, as was a "net present value". A
new definition of "point of production" was added on page
30. The definitions of "proprietary" and "trade secret"
were also added to this section.
Ms. Davis related that on page 32 there is a reference to
the Public Records Act, which was amended. It clarifies
that "privileged" was added.
Ms. Davis noted that a new section (8) was added at the
bottom of page 33, which clarifies that because AGIA is
placed in Title 43 under the Department of Revenue's
jurisdiction, having this provision in Title 38 will allow
the Department of Natural Resources authority to adopt
regulations to implement AGIA.
3:36:38 PM
Commissioner Galvin indicated that the Department of Law
feels soundly that the Administrative Procedure Act, which
requires a 30-day period for judicial review, would pertain.
Any action brought outside of that would be dismissed on
procedural grounds.
Discussion ensued regarding timelines for this legislation.
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