Legislature(2011 - 2012)HOUSE FINANCE 519
03/13/2012 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB252 | |
| HB9 | |
| HB289 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 9 | TELECONFERENCED | |
| + | HB 289 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
| += | HB 252 | TELECONFERENCED | |
| += | HCR 24 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 9
"An Act requiring the Joint In-State Gasline
Development Team to report to the legislature
recommended changes to state law that are required to
enable or facilitate the design, financing, and
construction of an in-state natural gas pipeline so
that the in- state natural gas pipeline is operational
before 2016; and providing for an effective date."
8:47:24 AM
REPRESENTATIVE MIKE CHENAULT, SPONSOR, introduced HB 9. He
stated two years ago the legislature passed HB 369, which
dealt with advancing an in-state gas pipeline project.
Since that time, the Alaska Gasline Development Corporation
(AGDC) had made progress developing a project along solid
timelines and the bill had been crafted to maintain the
momentum. He shared that the bill was more detailed than he
had originally intended. He relayed that the original
intention of the legislation had been to provide AGDC with
the tools that would allow the project to be refined to the
point of advancement. He qualified that advancement of the
project would be dependent on a successful open season.
The state had invested hundreds of millions of dollars in
pursuit of a gas pipeline, but it had been perpetually held
back due to a variety of reasons. The sponsors had
attempted to answer a number of concerns from other
members. He did not want the project to be in competition
with another gasline project. He admitted that he wasn't
sure of the logistics of the project. He believed the issue
was about policy and trying to get gas to Alaskans.
8:51:10 AM
Representative Chenault continued to discuss the
legislation. He understood that more gas could be sent
through a larger, rather than a smaller line. He said that
the state's hands were tied by the Alaska Gasline
Inducement Act (AGIA). He stated that the bill was an
attempt to address concerns to move the pipeline project
forward to an open season.
REPRESENTATIVE MIKE HAWKER, CO-SPONSOR, endorsed the
background and description of the bill sponsor. He
explained that HB 369, which had been passed two years
earlier, had been the inspiration for the legislation. He
shared that HB 369 had directed certain state employees at
Alaska Housing Finance Corporation (AHFC) to move forward
and begin developing a project plan for delivering gas to
Alaskans. He cited the specific objectives in the plan:
(c) The project plan must include specific plans to
coordinate and facilitate construction, ownership,
operation, and management of a natural gas pipeline
serving 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 in the south-central
region of the state.
Representative Hawker shared that a project plan had been
delivered in accordance with HB 369 that embodied the
mission. He said that HB 9 would provide the statutory
language to implement the vision that had been passed in HB
369. The technical language in HB 9 would take the project
to the next step of going to the market and finding out
what the market would bear in getting Alaska's gas to
Alaska's people. He reiterated that the open season would
inform the state as to how the project should proceed.
8:56:10 AM
Representative Hawker continued to address HB 9. He stated
that sections of the bill defined, refined, and clarified
the duties of AGDC. He referred to the sections as "the
Empowerments." He relayed that other parts of the bill made
technical amendments to the Alaska Natural Gasline
Development Authority (ANGDA) statutes by bringing them
into conformity as a sister company with AGDC for the
purpose of delivering gas to Alaskans. He stated that
sections in the bill allowed the pipeline to operate as a
contract carrier in lieu of the existing common carrier
statutes. He furthered that sections of the bill protected
projects moving forward from unnecessary judicial
interference. He said that some sections related to
empowering AGDC to enter into confidentiality agreements
and manage confidential information that was "mission
critical" to moving a project forward. Sections related to
the Regulatory Commission of Alaska (Regulatory Commission
of Alaska) exempted the project from provisions that were
not appropriate, and worked to define a framework of
appropriate regulations. Another section exempted the
project from property taxes during the construction period.
He revisited the "Empowerments." He shared that the
empowerments were necessary to enable the project to go
forward according to the original intent. He stated that
the project was "stand alone," and that AGDC should evolve
into partnership or ownership with other pipeline projects
or developers. He stressed that every day of hesitation
represented a day that the market was passing the state by.
Co-Chair Stoltze solicited further expert testimony.
Representative Mike Chenault noted that staff was available
to answer questions.
9:00:23 AM
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, discussed
the sectional analysis (copy on file). He stated that
Section 1 related to the duties and abilities of ADGC. He
highlighted the duties and abilities:
Section 1 relates to Alaska Gasline Development
Corporation's (AGDC) duties and abilities as a subsidiary
under the Alaska Housing Finance Authority (AHFC).
AGDC shall:
· Advance an instate gas pipeline as described in
the July 2011 project plan, with modifications as
necessary.
· Once construction on that line starts, analyze
additional pipelines to connect other regions of
the state, broadening the reach of gas beyond a
main line.
· Manage and invest a newly created pipeline fund
to yield competitive market rates.
· Following an open season, once precedent
agreements are signed, make public for each
shipper the name, capacity contracted for, and
length of contract.
Mr. Wright continued:
AGDC may:
· Decide how a pipeline will be owned and operated,
including joint ownership/operatorship.
· Use eminent domain to acquire land required for a
pipeline.
· Acquire property and interests in pipelines as
needed.
· Transfer or dispose of a pipeline project that is
an AGDC asset.
· Issue revenue bonds limited to AGDC's backing.
Mr. Wright read from the sectional analysis for CSHB 9
(RES):
Section 2 exempts ANGDA from the state procurement
code when contracting for professional services;
conforming to Section 19 (AGDC is already exempt).
Adds a new paragraph to AS 36.30.850, Public
Contracts, State Procurement Code, Application of this
chapter
Section 3 provides AGDC access to information of state
agencies related to a gas pipeline. As the Joint In-
State Gasline Development Team (JIGDT) created in HB
369 in 2010 is repealed in section 28, HB 9, this
section also changes "JIGDT" to "AGDC." (Section 28
repeals JIGDT.)
Amends AS 38.34.050, Public Land, Instate Natural Gas
Pipeline, Cooperation and Access to information
Section 4 directs state agencies to cooperate with and
give priority AGDC requests, and calls on AGDC to
avoid duplicating other state-supported work. As JIGDT
is repealed in section 28, HB 9, this section also
changes "JIGDT" to "AGDC."
Amends AS 38.34.050, Public Land, Instate Natural Gas
Pipeline, Cooperation and Access to information
Section 5 requires DNR to grant a state right-of-way
lease to AGDC at no cost or rental fee, and exempts
those leases from the common carriage covenants in the
state Right of Way Leasing Act. Exemption from the
covenants has the effect of allowing an AGDC line to
operate as a contract carrier.
Amends AS 38.34.050, Public Land, Instate Natural Gas
Pipeline, Cooperation and Access to information
Section 6 allows AGDC to enter into confidentiality
agreements, including with state agencies, and deems
confidential information related to field studies and
technical data. Calls on municipalities and agencies
to provide non-hydrocarbon natural resources, such as
water, sand and gravel, at usual and customary rates.
Requires AGDC to bear those costs but does not allow
those costs in a rate base.
Adds new subsections to AS 38.34.050, Public Land,
Instate Natural Gas Pipeline, Cooperation and Access
to information
Section 7 revises definitions of "AGDC," "in-state
natural gas pipeline," and "natural gas pipeline."
Repeals and reenacts 38.34.099, Public Land, Instate
Natural Gas Pipeline, Definitions
9:05:11 AM
Section 8 conforms to Section 5, right-of-way leasing.
Amends AS 38.35.100, Public Land, Right-of-Way Leasing
Act, Decision on Application
Section 9 Conforms to Section 5, Right-of Way Leasing
Amends AS 38.35.100, Public Land, Right-of-Way Leasing
Act, Covenants required to be included in lease
Section 10 Conforms to Section 5, Right-of Way Leasing
Amends AS 38.35.100, Public Land, Right-of-Way Leasing
Act, Covenants required to be included in lease
Section 11 Conforms to Section 5, Right-of Way Leasing
Adds new subsection to AS 38.35.120, Public Land,
Right-of-Way Leasing Act, Payment of rental and costs
Section 12 limits judicial review of state lease,
permit or other authorization decisions to superior
court and prohibits the court from granting injunctive
relief. Claims must be brought within 60 days of an
action for which relief is sought.
Adds new subsections to AS 38.35.200, Public Land,
Right-of-Way Leasing Act, Judicial review of decisions
of commissioners on application
Section 13 exempts information covered by an AGDC
confidentiality agreement from the state Public
Records Act. (This section exempts from public records
disclosure the information allowed under Section 6 to
be kept confidential)
Amends AS 40.25.120 Public Records and Recorders,
Public Record Disclosures, Public Records; exemptions;
certified copies
Section 14 amends ANGDA's purpose, enabling ANGDA to
act as a gas marketer instead of transporter, and
eliminating proscriptive language regarding gas supply
and gas market locations.
Amends AS 41.41.010, Public Resources, Alaska Natural
Gas Development Authority, Establishment of the
authority
Section 15 broadens ANGDA's purpose as a natural gas
marketer.
Amends AS 41.41.010, Public Resources, Alaska Natural
Gas Development Authority, Establishment of the
authority
Mr. Wright stated that ANGDA would remain intact to follow
the voter's initiative in 2002, but instead of having
competing purposes, ANGDA would continue as a marketer and
allow AGDC to focus on the building, operating and
ownership of a gasline.
Section 16 adds to ANGDA's statutory abilities by
allowing ANGDA with the DNR commissioner to pledge
state royalty gas for contracts entered into by ANGDA.
Adds new subsection to AS 41.41.010, Public Resources,
Alaska Natural Gas Development Authority,
Establishment of the authority
Section 17 states that ANGDA, as an AHFC subsidiary,
shall be governed by the AHFC board of directors.
Repeals and reenacts AS 41.41.020, Public Resources,
Alaska Natural Gas Development Authority, Authority
governing body
Section 18 amends ANGDA statues related to board
compensation, to conform to Section 17.
Amends AS 41.41.060, Public Resources, Alaska natural
Gas Development Authority, Compensation of board
members; per diem and travel expenses
Section 19 amends ANGDA statutes to include legal
counsel in the services ANGDA may contract for, and
exempts procurement of contracted services from the
state procurement code.
Amends AS 41.41.070, Public Resources, Alaska Natural
Gas Development Authority, Authority staff
Section 20 amends ANGDA board member and employee
conflict of interest disclosures, removing involvement
with a "project" from the circumstances requiring
disclosure. {Conforms to Section 14 redefining ANGDA's
role}
Amends AS 41.41.150, Public Resources, Alaska Natural
Gas Development Authority, Conflicts of interest
Mr. Wright interjected that many of the changes in the
ANGDA statutes were conforming to ANGDA's position as a
marketer.
Section 21 amends ANGDA's statutory authority to
include as confidential and exempt from the public
records act information within a confidentiality
agreement between ANGDA and AGDC.
Section 22 amends ANGDA's statutory authority,
removing the authority to exercise eminent domain.
(Conforms to Section 14 redefining ANGDA's role)
Amends AS 41.41.200, Public Resources, Alaska Natural
Gas Development Authority, Powers of the authority
Section 23 conforms to Section 17 by defining "board"
in ANGDA's statutes as the AHFC board.
Amends AS 41.41.990, Public Resources, Alaska Natural
Gasline Development Authority, Definitions
Section 24 requires public utilities to submit
contracts with AGDC to the Regulatory Commission of
Alaska; gives the Regulatory Commission of Alaska 180
days to approve or disapprove the contracts. Requires
AGDC or an entity controlled by AGDC to submit non-
utility contracts, under seal, to the Regulatory
Commission of Alaska; provides the Regulatory
Commission of Alaska 30 days to approve non-utility
contracts if the tariffs are no higher than the
weighted average of tariffs in public utility
contracts.
Adds new section to AS 42.05, Public Utilities and
Carriers and Energy Programs, Alaska Public Utilities
Regulatory Act
Mr. Wright stated that Section 24 was the result of an
amendment from House Resources Committee to assure that the
state's interests were protected.
Section 25 exempts an AGDC-controlled project from the
Regulatory Commission of Alaska under 42.05, Public
Utilities Act.
Adds new subsection to AS 42.05.711, Public Utilities
and Carriers and Energy Programs, Alaska Public
Utilities Regulatory Act, Exemptions
Section 26 exempts a pipeline in which AGDC has an
interest from Regulatory Commission of Alaska
regulation under 42.06, the Pipeline Act.
Adds new section to AS 42.06, Public Utilities and
Carriers and Energy Programs, Pipeline Act, Article 7,
General Provisions
Section 27 exempts an AGDC project from state and
local property taxes during construction.
Adds new subsection to AS 43.56.020, Revenue and
Taxation, Oil and Gas Exploration, Production and
Pipeline Transportation Property Tax, Exemptions
Section 28 repeals seven statutes.
Repeals AS 38.34.030, Public Land, In-State Natural
Gas Pipeline, Joint In-State Gasline Development Team;
38.34.040, Duties of the Development Team; and
38.34.060, Conflicts of interest. Repeals AS
41.41.030, Public Resources, Alaska Natural Gas
Development Authority, Term of office; 41.41.040,
Removal and vacancies; 41.41.050, Quorum and voting;
and 41.41.080, Legal counsel.
Section 29 repeals Section 1 of the 2002 Ballot
Measure No.3, the findings of which are no longer
applicable or necessary with ANGDA's revised
authority.
Section 30 is transition language expressing the
legislative intent that existing tight-of-way leases
between AGDC and DNR are to be amended to reflect the
exemption from common carriage covenants contained in
Section 5 of HB 9. (The Alaska Constitution bars the
Legislature from passing laws that apply retroactively
to contracts in place)
Section 31 is reviser's instructions.
Section 32 sets and immediate effective date.
9:10:27 AM
JOE DUBLER, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
ALASKA GASLINE DEVELOPMENT CORPORATION AND DIRECTOR OF
FINANCE, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF
REVENUE, testified that he was available for questions.
Vice-chair Fairclough asked if a reclamation clause for a
gas pipeline had been written in to the bill.
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER,
responded that there was no reclamation clause in the bill.
She stated that the state pipeline coordinator's office
currently had standards in place regarding abandonment
should a line become no longer operational. She explained
that gas pipelines differed from oil pipelines in that
gaslines were generally beneath the ground. She said that
rather than being dug up, gaslines tended to get flushed
clean and then sealed off.
Vice-chair Fairclough stressed the importance that
reclamation language should exist for anything above
ground. She directed attention to Section 23. She wondered
how one governing board could be in multiple layers; would
the courts view the board as one corporation with full
liability.
Mr. Wright replied that Page 4, subsection (d), spoke to
the issue of debt obligation:
(d) No debt, obligation, or liability of the Alaska
Gasline Development Corporation shall become a debt,
obligation, or liability of the state or any part or
subdivision of the state or of the corporation or a
subsidiary corporation of the corporation other than
the Alaska Gasline Development Corporation, except as
provided in this subsection.
9:14:19 AM
Vice-chair Fairclough thought that the answer could come
best from legislative legal. She asked if one project
management board residing under multiple subsidiary
corporations would be a liability for the state of Alaska.
Mr. Wright responded that both ANGDA and AGDC were
subsidiaries of AHFC, which was why there was only one
board of directors.
Mr. Dubler elaborated that the courts looked at the common
control of entities. He added that similar relationships
existed in other companies. For example, oil companies
could have separate shipping and marketing companies that
had similar control over certain projects. The department
believed that there was enough segregation that the issue
would not be a problem for the corporation.
Vice-chair Fairclough requested a legal memo that clarified
the liability issue.
Mr. Dubler stated that general legal counsel could be
present at the next hearing.
Representative Doogan did not believe that there was
anything to be done about the obligations of the state with
regard to the corporation. He expressed concern that if
things went poorly for the corporation the obligation would
fall directly to the state. He furthered that the section
that exempted the Public Records and Procurement Acts from
legislative oversight was troublesome.
9:19:02 AM
Ms. Delbridge replied that assurances of the state's legal
and financial protection could be supplied at a later date.
She explained that the Public Records Act had a multi-page
exemption list; or information that, in other context in
the state, was kept confidential. She stated that when AGDC
was allowed to enter into confidential agreements it was
agreed that the information was not subject to release
under the Public Records Act. She said that AGDC was
currently unable to fully participate in discussions with
other commercial parties; for example, Trans-Canada, who
was working on the Alaska Pipeline Project. She relayed
that corporate attorneys from Trans-Canada were reluctant
to allow their company to engage in discussions with AGDC
because there was no way of knowing that shared information
would be held completely confidential. She said that the
kind of information she was referring to related to another
section of the bill that instructed AGDC not to duplicate
work already being performed by other state agencies, or
with support from the state buy others. For example, the
state was reimbursing a portion of Trans-Canada's work on
the Alaska Pipeline Project and AGDC should be able to
share in the data collected.
Representative Doogan understood that the exemption was a
complete exemption.
Ms. Delbridge referred the committee to Section 6. She
stated that the section allowed the AGDC to hold certain
information confidential, and allowed for the AGDC to enter
into confidential agreements with other private interests
or state agencies. She said that this would allow for the
flow of information that was already proprietary or
commercially privileged. She highlighted Section 13, which
exempted from disclosure under the Public Records Act the
information that was covered by a confidentiality agreement
between AGDC and the provider or recipient of the
information.
Representative Doogan understood that the exemption covered
information that would expectedly be confidential in a
business environment.
Ms. Delbridge replied in the affirmative.
Mr. Dubler added that the intent of the exclusion from the
Public Records Act was to allow the corporation to enter
into discussions with other companies that wanted to ship
gas on the line. He said that companies would never share
their information if they though it would be subject to
request under the Freedom of Information Act. He stressed
that corporations did not like to share information unless
absolutely necessary. He said that the language in the bill
allowed for the confidentiality agreement, which would
allow for real project progression.
9:25:40 AM
Representative Gara expressed concern that exploration in
Cook Inlet would be deterred if prospectors realized that
the state planned to subsidize a gasline from the North
Slope.
Mr. Dubler replied that the state would not be subsidizing
the line, the state would only be providing the seed money.
He said that the line would eventually pay for itself and
there would be no ongoing state subsidy. He shared that the
current price of gas out of Cook Inlet was below the
projected delivered price for North Slope gas to the Cook
Inlet and Fairbanks areas. He believed that future
utilities contracts would raise the value of the gas found
on the North Slope.
Representative Gara remained concerned about the possible
detrimental effect on Cook Inlet exploration. He feared
that building the pipeline could result in the most
expensive gas ever experienced in the state. He felt that
the idea of reducing the price by getting an anchor tenant
that would take on an extra quarter billion cubic feet of
gas was a flawed plan. He doubted that a company would
approach the state saying, "That is the most expensive gas
in the country. Let me double the size of the pipeline." He
said that the pipeline had to have a 20 to 30 year
commitment from consumers to buy the gas from the line,
before it could be built. He said that if consumers were
bound by the AGDC July 2010 estimate of $17 gas, and then
they would not be able to take advantage of a larger line
that produced cheaper gas sometime in the future.
Mr. Dubler shared that the July 2010 report could not be an
AGDC report, as ADGC was created in 2011. In 2011 the
corporation put out a report showing $9.65 gas to the
Anchorage area. The project would not be complete until
2019; the governor had vocalized there would be an
alignment on any other projects going forward. He said that
if a larger gasline, planned for south-central was to go
ahead, the project under discussion in the bill would be
dropped.
9:30:18 AM
Mr. Wright queried what would quell public outcry if no gas
was found in Cook Inlet, and the state remained hesitant on
building a large line.
Representative Gara surmised that if it turned out that
there were not large stores of gas in Cook Inlet the state
would have to move more quickly on the matter. He pointed
attention to the ADGC study estimate of a 250 thousand
cubic foot (Mcf) line at $17. He was concerned that if the
state was trying to tide itself over while waiting for a
large gasline, he thought that the way to do it would be to
spend less money to subsidize the Fairbanks area. He shared
that Fairbanks had proposed trucking gas to the area, and
had estimated that gas could be delivered at as low as $11
Mcf. He thought exploring the cheapest options to get gas
to people, while planning for an eventual large line,
should be considered in the bill.
Mr. Dubler replied that it would be a policy call for the
legislature and the governor. He stated that a 250 Mcf
pipeline would never be built because it was not
economical. He spoke to the report cited by Representative
Gara. He said it was projected in the report that for $14 -
$16, liquefied natural gas (LNG) could be imported from
Sakhalin, Russia. He stated that in May of 2011 the
corporation had not received interest at full capacity for
a 500 Mcf line for a commercial and an anchor tenant. He
said that it was expected that the pipeline would be filled
at 500 Mcf, which was why it was believed that the tariff
of $9.65 was attainable.
Representative Gara countered that the cost of gas for a
250 Mcf line was higher than a 500 Mcf line. He said
currently the state used less than 250 Mcf, in terms of
natural gas. He queried why an anchor tenant was going to
more than double the use of gas in Alaska, when the gas was
going to be more expensive than anywhere else in the
country. He stressed that no company was going to relocate
to Alaska for more expensive gas.
Mr. Dubler replied that projections anticipated that in
south-central, Fairbanks, and the bases in Fairbanks, 240
Mcf would be used per day. He said that the expression of
interest that the corporation had received, although not as
binding as an open season, was from a viable entity. The
entity had offered a commitment to ship on the line 250 to
260 Mcf, and that would fill the line at 500 Mcf per day.
He furthered that the demand was anticipated, but if an
anchor tenant did not appear upon a binding open season,
the project would be abandoned and LNG would be imported.
9:35:33 AM
Ms. Delbridge interjected that it was the sponsor's intent,
and AGDC's original mission, to examine and compare various
line sizes in order to come up with a gasline with a tariff
that works for Alaska. She acknowledged that there was a
question of how much demand from the line the Railbelt
could currently use, the lack of available gas in Cook
Inlet already had prohibited the expansion of natural gas
distribution utilities in south-central. She stated that
one of the reasons that the state did not have continuing,
large-scale LNG exports out of Nikiski was due to the
inability to secure long-term gas contracts. She relayed
that bringing down the additional gas would help with the
security of supply that would enable greater options and
greater expansion. She predicted that home-grown Alaskan
businesses might create propane or compressed natural gas
distribution projects. She added that the 20 to 30 year
contracts could be as short as 10 to 15 years, and could
vary in time length between different utilities and end-
users, this would allow for the accommodation of changing
conditions. She suggested that having a secure supply of
gas in the south-central region would facilitate a greater
desire to explore in Cook Inlet because there would be an
outlet for the gas through existing LNG exports. She stated
that depending on what happened with AGIA, HB 9 allowed
AGDC to shift gears to become the builder, designer, and
operator of a spur-line off of a large diameter pipeline.
9:38:37 AM
Representative Wilson reminded the committee that gas was
needed in Fairbanks sooner than later. She asked about the
definition of "serving Fairbanks" as it was written in HB
369. She queried the responsibilities of her district under
the legislation.
Ms. Delbridge answered that the project included a 35 to 40
mile line to connect the Dunbar Region into Fairbanks/North
Pole proper. She said that the precise locations and buyers
would be identified the point of an open season. She
explained that a straddle plant would be necessary at any
point in the line where gas was extracted. She detailed
that a straddle plant was a facility that would extract the
liquids from the gas, let the dry gas flow through, and
then reintroduce the wet gas into the line. She said that
the tariffs paid on the line would depend on whether it
carried wet or dry gas.
Representative Wilson stressed that her community wanted a
pipeline but had reservations about who would bear the
cost.
Co-Chair Stoltze noted that a gasline should not be built
without firm commitments and contracts in place.
9:41:44 AM
Representative Neuman referenced the Rocky Mountain
Express, which was the last built major pipeline. He said
that the 42 inch line that traveled through 8 states was
1679 miles long and had cost $6.8 billion. He thought that
$7.4 billion for a 24 inch line that was 700 miles long did
not make sense. He wondered what the differences were in
the two projects that resulted in the extreme cost
differences.
Mr. Dubler replied that there were more difficulties
attached to building in an arctic environment, rather than
the Continental United States. He highlighted several
issues including permafrost and bogs. He felt that it was
comforting that costs had been overestimated, rather than
the alternative. He stated that an analysis conducted for
the legislature that had found that the cost estimates
were conservative. He said that the $7.52 billion figure
was intentionally conservative.
Representative Neuman thought that the project would be
"fairly simple to do," regardless of the arctic conditions.
He said that the construction would occur on what was
essentially a road already. He appreciated that
conservative estimate, but requested further analysis that
would reflect actual cost.
Mr. Dubler replied that the analysis was currently
underway. He said that the estimates form July 2011 were at
plus or minus 30 percent confidence level. He said that the
number would be somewhere between $5 billion and $10
billion. He added that the tariff would be based on the
actual cost of the project.
9:46:12 AM
Representative Neuman discussed deliverables. He wondered
what the economic impact on Alaska would be if a gas
pipeline were to drive more energy for gold development and
other electrical generation. He probed what the impact
would be for Alaska economically. He thought that there
would be huge economic impact involved, in addition to
deliverables, which could be calculated.
Ms. Delbridge believed that the legislature's approval of
HB 369 had been in recognition of the work that had been
done while examining the question of economic impact. She
said that identifying an instate gasline would bring down
energy costs for consumers and help large mine contracts
and industrial developments to pencil out. She stressed
that the economic benefits were broad, which was the basis
for encouraging AGDC to move forward with the line.
9:48:48 AM
Mr. Dubler added that it was estimated that 8000 jobs would
be created in the 2 to 3 year construction period. He
pointed to page 3, line 8 that directed AGDC to look for
other areas in the state that could utilize the gas from
the pipeline. He added that the pipeline could help in
encouraging future mining projects in the state.
Representative Neuman asked about enabling language. He
expressed frustration that information concerning the AGDC
entering into negotiations with pipeline options had been
slow to reach the legislature. He clarified that the state
was putting up a considerable amount of money, yet received
very little information back. He recognized that there were
confidentiality issues surrounding some information.
Ms. Delbridge replied that the enabling language could be
found in Section 1 of the bill; the "shall and "may" bullet
points of the AGDC. She said that AGDC shall continue on
the project presented in the project plan with
"modifications as necessary." She stated that the
"modifications as necessary" was important because the
project could be altered the results of an open season. She
relayed that the project plan did not specify where on the
North Slope gas would be coming from; that could shift
depending on who had the gas to sell. She furthered that
while AGDC was required to proceed with the project plan,
with modifications, it was also empowered to broadly
examine gasline opportunities. She qualified that AGDC
would be expected to pursue the project plan until a better
plan presented itself.
9:52:43 AM
Representative Guttenberg wondered what unique set of
skills AHFC had that justified the project being housed
under the corporation's umbrella.
Ms. Delbridge replied that AHFC had an excellent record in
managing and investing Alaska's assets in a highly
responsible way. She relayed that in HB 369 AHFC had been
tasked as the lead agency on the project. She shared that
the corporation had brought together a solid team to
advance the state's interests. She furthered that through
AGDC, AHFC had employed experts with decades of pipeline
experience within the state. She stated that the 3
commissioners currently sitting on the AHFC board would
protect the state's interests moving forward; additionally,
there was a balance throughout the entire board of
representation from various regions of the state. She said
that AGDC retained the ability to select the pipeline
operator and builder.
Mr. Dubler clarified that the AHFC board was composed of 7
people; the three commissioners were from the Department of
Revenue, Department of Health and Social Services (DHSS),
and the Department of Commerce, Community, and Economic
Development (DCCED). He acknowledged that DHSS may not
apply to the pipeline, but that certainly DOR and DCCED
would be involved. He added that the 4 public members of
the board were required to demonstrate a specialty in
energy, finance, or senior housing.
Co-Chair Stoltze interjected that the four public members
had to be confirmed by the legislature.
Mr. Dubler responded that including the separate
confirmation required for commissioners upon taking office,
all 7 members were confirmed by the legislature.
Representative Guttenberg understood that the AHFC had done
a good job in the realm of housing; however, the project
under discussion was a very different venture. He asked
about the nature of the contract carrier versus the common
carrier. He queried the restrictions on contract carriers
in future development.
9:57:44 AM
Ms. Delbridge believed that a natural gas pipeline in
Alaska would need to operate as a contract carrier, much
like the other gaslines in the Lower 48. She stated that
with an oil pipeline there was a greater ability to ship
the capacity allocated to various customers in a day to
make room for other involved parties at given points in
time. She countered that a gas pipeline would need firmer
contracts; if a shift were suddenly required in order to
make room for another buyer, power could be inadvertently
cut from another electric utilities gas. She addressed the
benefits of common carriage. She shared that common
carriers benefited exploration, but that being a contract
line would not limit Alaska's potential for expansion. She
explained that the terms of expansion would be written into
the contracts AGDC foraged with customers. She said if
newcomers arrived with a volume that supported the
investment required to install additional compression, or
to loop the pipeline, terms would be worked out
contractually with AGDC. She declared that the fuller the
pipeline, the better off those using the pipeline. She said
if there was room, it was likely that the pipeline
operating company would have great interest in allowing
entry to newcomers. She noted the caveat was that the
instate pipeline was limited in size because of the AGIA
requirement that the state refrain from supporting a
competing line. She said that as long as the AGIA terms
were in place the expansion was not an immediate issue. She
relayed that if the provision capping the available flow
and space on the pipeline were removed then the possibility
of adding additional compression and increasing side was
more likely. She added that there was the possibility that
if additional transport capacity could be added below the
68th parallel without violating the competing line terms of
AGIA.
Representative Guttenberg noted that the project had been
locked in to advance as described in the July 2011 report.
He wondered how much leeway would be necessary in order to
respond to changing economics.
Ms. Delbridge believed there was a considerable amount of
leeway given in the language of the bill. She stated that
allowing for modifications was intended to give AGDC the
flexibility during an open season to see: who had the gas
to ship, who wanted to buy the gas, and to connect those
sellers and buyers with transportation. She relayed that
the concept was that the project produce a main, mid-sized
natural gas transportation pipeline.
10:03:08 AM
Representative Guttenberg stressed that given all the
modification possibilities, it would impossible for the
state to know the details of what it could expect for the
investment.
Ms. Delbridge countered that what the bill did was to allow
AGDC to take the project to an open season. She furthered
that at that point the project would be defined absolutely,
based on who had gas, and who needed gas. She stated that
the legislature would receive routine updates from AGDC,
and would retain "the power of the purse strings." She
clarified that the bill did not implicitly tell AGDC to
build the pipeline, but to solidify a project plan after
the open season. She said that the expectation was that
AGDC would come back before the legislature for additional
operating money, and for the eventual equity contribution
of the state, should the state choose to issue revenue
bonds to fund a large pipeline. She stressed that that was
a decision that was expected several years into the future.
Mr. Dubler added that the bill contained sideboards
intended to inform any modification of the plan. He relayed
that the sideboard instructed that the pipeline be
constructed in a safe and economical manner.
Ms. Delbridge reiterated that the AGDC would remain bound
to the essential mission detailed in HB 369, which was to
build a gasline that connected people in Alaska with gas,
and at the lowest possible cost.
Representative Edgmon believed the legislation was
important despite the ever-changing economics related to
providing affordable energy. He stated that the anchor
tenant issue could prove problematic for rural Alaska, and
hoped that the issue could be addressed more in-depth.
10:07:16 AM
Representative Doogan asked why the agency was exempt from
the procurement code.
Mr. Dubler replied that there had only been one year to
prepare the report and the department had not wanted to
bind the entity with public notice requirements. He said
that being exempt from the procurement code planed a bigger
burden on the agency because there were no rules to operate
under, and instead the agency had adopted rules similar to
the state procurement rules. He explained that day-to-day
procurement operations were initiated under AHFC
procurement rule, which were based on the state's rules. He
shared that an internal audit had recently been performed
and could be made available to the committee.
Representative Doogan maintained that the procurement code
exemption was a discomforting aspect of the legislation.
Representative Doogan asked about an anchor tenant at 250
Mcf that Mr. Dubler had mentioned.
Mr. Dubler replied that there had been a preliminary
showing of interest; knowing that there was 240 million
cubic feet of usage currently in the south-central area. He
said that it made sense that if there was half a billion
cubic feet of interest, that there was another entity in
place to bid for the remainder.
Representative Doogan asked who the bidding company was.
Mr. Dubler replied that the information was confidential.
Representative Doogan cited Page 12, line 28 related to
judicial review. He believed that the language bound the
hands of the court in relation to how it would normally
handle complaints.
Mr. Wright explained that the language dealt with right-of-
ways. He shared that similar legislation had been found in
the Federal Trans-Alaska Pipeline System (TAPS) act, as
well as in state law. He said that the language did
prohibit the court from issuing temporary injunctive
relief, but relief could be issued through a final order.
He stated that the language had been modeled after the TAPS
legislation in order to make sure that special interest
groups would be deterred from filing complaints that
jeopardized progress on the project.
10:13:35 AM
Representative Doogan recognized the difficulty in making
accurate cost estimates for the project. He expressed
concern that the project was going to cost a lot more than
estimated. He hoped that the possibility that the project
could cost more than estimated was being taken into
consideration.
Mr. Wright referred to small changes that had been
recommended by various agencies. He shared that the
sponsors would be working with co-chair staff to address
any alterations of the bill.
HB 9 was HEARD and HELD in committee for further
consideration.
10:16:34 AM
AT EASE
10:22:21 AM
RECONVENED