Legislature(2011 - 2012)HOUSE FINANCE 519
03/16/2012 09:00 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB78 | |
| HB9 | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 9 | TELECONFERENCED | |
| += | HB 78 | 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."
Representative Gara asked if a representative from Alaska
Housing Finance Corporation (AHFC) would be available to
answer questions in future hearings.
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, mentioned
that there were various people online to answer questions.
Vice-chair Fairclough MOVED to ADOPT proposed committee
substitute HB 9, Work Draft 26-LS0075\K (Bullock, 3/16/12)
as a working document.
Co-Chair Stoltze OBJECTED for purpose of discussion.
Tom Wright spoke of changes in the committee substitute. He
noted the summary of changes available and a title change
due to the adopted language in the body of the bill (copy
on file).
Mr. Wright pointed out the summary of changes in the bill.
He referred to the Title Change:
Page 1, line 6, after "lease or", adds "an action or
decision related to"
Page 1, line 8, after "Corporation", adds "or a
successor in interest"
SECTION 1:
Page 2, line 8, through Page 3 line 5: Adds a new
section of Legislative Findings and Intent.
Page 2, lines 11-15: Incorporates a Letter of Intent
related to disclosure of operating agreements into the
body of HB 9. Clarifies intent language so that
executed operating agreements will be disclosed
publically to the extent the disclosure will not
divulge trade secrets or other proprietary business
information.
Page 2, line 16, through Page 3, line 5: Adds findings
and intent related to AGDC's mission; direction to
provide gas and to ship gas at commercially reasonable
rates; makes a determination of an AGDC project as
being within the public convenience and necessity,
declares development of an instate gas pipeline as in
the best interests of the state; and finds that the
state shall nave a policy of making state royalty gas
available for shipment in an AGDC pipeline.
SECTION 2: Renumbered from Section 1; no other
changes.
SECTION 3: Renumbered from Section 2; no other
changes.
SECTION 4: Renumbered from Section 3.
Page 6, lines 20-28: Sets parameters on the direction
for state agencies to give AGDC access to information
directly related to an instate natural gas pipeline.
If an agency finds that information to be transferred
to AGDC is confidential, the agency may require a
confidentiality agreement and, if a third party's
rights are affected, AGDC may have to secure the third
party's consent.
This change is recommended by the Department of law
and is intended to set parameters around the
information that is to be shared between state
agencies and AGDC. Some information held by state
agencies is confidential, and cannot be automatically
shared with AGDC.
SECTION 5: Renumbered from Section 4; no other
changes.
SECTION 6: Renumbered from Section 5.
Page 7, line 10: Changes "at no cost or rental fee" to
"at no appraisal or rental cost.
This change was recommended by the State Pipeline
Coordinator's Office/Department of Natural Resources
and better reflects existing terminology.
SECTION 7: Renumbered from Section 6.
Page 8, lines 15-16: adds after "rates," "except as
provided in (c) of this section".
Conforms to the change in Section 6, clarifying that
while nonhydrocarbon natural resources of the state
are to be made available to AGDC at usual and
customary rates, a state right-of-way lease will be
granted at no appraisal or rental cost.
Page 8, lines 25-28: Adds new subsection (I).
Clarifies that a state Right-of-Way lease entered into
by AGDC may be transferred to a successor under the
same terms the lease is granted to AGDC.
SECTION 8: Renumbered from Section 7; no other
changes.
SECTION 9: Renumbered from Section 8; no other
changes.
SECTION 10: Renumbered from Section 9; no other
changes.
SECTION 11: Renumbered from Section 10; no other
changes.
SECTION 12: Renumbered from Section 11.
Page 13, line 18, after "notwithstanding (a},":
removed "and (b)."
Page 13, line 19: Replaced "cost to or reimbursement
by" with "appraisal or rental costs to."
Both changes were recommended by the State Pipeline
Coordinator's Office/Department of Natural Resources.
SPCO operates on receipt authority, and AGDC will need
to pay for services. The term "appraisal or rental
costs" conforms to existing SPCO/DNR terminology.
SECTION 13: Renumbered from Section 12.
Page 14, line 13: Added "or authorization" after
"decision."
Page 14, line 14-15, after "under": Replaced
"authority delegated to" with "a program approved
or delegated by."
Both changes address technical concerns by Department
of Environmental Conservation.
SECTION 14: Renumbered from Section 13; no other
changes.
SECTION 15: Renumbered from Section 14; no other
changes.
SECTION 16: Renumbered from Section 15; no other
changes.
SECTION 17:
Page 17, lines 16-18: Inserted "A pledge made under
this subsection shall be treated as a disposal of gas
other than by sale or exchange for purposes of AS
38.05.183."
Department of Natural Resources recommended this
change to accommodate existing statutes related to
royalty gas.
SECTIONS 18-33 are renumbered; no other changes.
9:42:05 AM
Representative Gara remarked that the state owns roughly
one out of every eight units of natural gas. He questioned
how one sells just one out of every eight units without
producing the other seven eighths.
RENA DELBRIDGE, STAFF, REPRESENTATIVE MIKE HAWKER,
responded that the state's royalty gas would be made
available for shipment in the pipeline, not that there
would be no other gas involved. Representative Gara noted
that the state gets a royalty on roughly one eighth of the
value of the hydrocarbon product when it is commercialized
and wondered if the other seven eighths must be sold at the
same time for there to be royalty gas. Ms. Delbridge
replied that in order to have royalty gas taken as royalty
gas "in kind," that there would need to be other gas in
production.
Co-Chair Stoltze remarked that shipping commitments were an
essential ingredient.
Representative Costello questioned the change in Section 1
relating to the policy changes. She read it to say that
Alaska is taking its royalty "in-kind." Mr. Wright agreed,
but that was for gas not already committed. For any gas not
committed, the state would be like it to be used for
consumers and commercial enterprises. Representative
Costello questioned the physics of natural gas versus oil;
she understood that the size of the pipe does not matter.
She asked that, under the legislation, would it be possible
for the state to invest in making a 48 inch pipeline to
pursue an owner-interest under the Alaska Gasline
Inducement Act (AGIA).
Mr. Wright requested that Joe Dubler respond to that
question.
JOE DUBLER, VICE PRESIDENT, ALASKA GASLINE DEVELOPMENT
CORPORATION (via teleconference)responded that building a
48 inch pipeline from the North Slope to South Central was
a feasible project, but uncertain if it would be
commercially feasible. At present, it would be difficult
due to being so far along in the permitting process. After
a certain point is reached, modifications can be made to
permits received. It is an option open to the state if the
state wanted to fund it. If the commercial entities come
into the project to ship gas to the extent that a 48 inch
pipeline could not be filled, the costs would not be
recoverable.
Representative Gara thought the bill left AGIA intact and
AGIA has the provision of not being able to ship more than
a half of billion cubic feet (Bcf) of gas a day. He did not
believe that would allow for a 48 inch pipeline. Mr. Dubler
responded that would be correct, but he believed
Representative Costello's question addressed making it a 48
inch pipeline under AGIA law.
9:47:52 AM
Representative Doogan asked for the meaning of Section 12
that adds a new subsection "c." Ms. Delbridge asked if the
question was in reference to the appraisal in rental costs.
Representative Doogan referred to the right-of-way lease.
Ms. Delbridge responded that the right-of-way lease is a
lease agreement entered into by the Alaska Gasline
Development Corporation (AGDC) and the Department of
Natural Resources. The State Pipeline Coordinators Office
(SPCO) is charged with administering the terms of the
lease. The original intent was that the state agency needed
to provide permits and leases to AGDC at no cost. The costs
would be rolled into the tariff. The state determined, in
the interest of the public, that the cost does not need to
be in the tariff and that would keep tariffs lower for
people getting gas in Alaska. The State Pipeline
Coordinators Office (SPCO) operates on receipt authority so
they need the entities they administer leases for to pay
for having that administration done. The sponsors believed
it was appropriate, in that instance, for AGDC to pay the
costs required for administration of the leases.
9:50:12 AM
ANNE BROWN, DEPUTY DIRECTOR, STATE PIPELINE COORDINATOR'S
OFFICE, DEPARTMENT OF NATURAL RESOURCES (via
teleconference), responded that the question regards the
way the SPCO tracks funding and billing for pipeline
projects. The benefit of the proposed change would be to
give it flexibility and allow them to change authority. All
the state agencies working on the project would go through
the reimbursable agreement. They would like to keep the
billing system to make it easier to manage, but there is no
objection to adding something in the legislation to not
have it as part of tariff. The setup works smoothly with
less effort for tracking costs and flexibility in
responding to needs.
Representative Wilson asked about page 2, line 18, "making
natural gas available to Fairbanks…" She stressed the
community needed gas at a more affordable rate, but
wondered if there was any way it could be tighter as a
statewide project and not fall to the local residents.
Co-Chair Stoltze questioned the definition of Fairbanks.
Ms. Delbridge replied that it was Fairbanks as a population
center.
Mr. Wright responded to Representative Wilson's question by
referring to Mr. Dubler.
9:53:35 AM
Mr. Dubler responded that the tariff proposed to Fairbanks
included the lateral line and not an additional charge on
top of the tariff. Regarding the distribution lines within
the community; the charge of the gasline corporation was to
deliver gas to Fairbanks, but not pay the distribution line
costs.
Representative Wilson realized distribution lines would be
Fairbanks responsibility. She indicated that as long as
Alaska Gasline and Development was in charge, no one had an
issue. But if a private corporation came in and built the
pipeline, then decided it was not affordable by their
numbers, Fairbanks would get left out because the numbers
did not work.
Mr. Dubler responded that the cost of the incremental
pipeline from the main line into Fairbanks would be a
short, small, inexpensive line, so even if a commercial
entity took over, there would be sufficient use in the
Fairbanks area to build that line. A commercial entity
could make money with the incremental line.
Ms. Delbridge clarified that there is nothing in HB 9 that
would preclude commercial interests from coming in and
doing it themselves anyway. The legislation, by providing
greater structure to AGDC, allows them to look at someone
else's project and consider lines into population centers
in the Interior and South Central.
9:57:04 AM
Representative Neuman asked Ms. Brown that with the
exclusive license with TransCanada, would there need to be
changes to the exclusive license to allow AGDC or other
producers to come under the fold of the exclusive license.
Ms. Brown responded that was a better question for an
attorney. The project is designed not to conflict with the
AGIA project. If they were to come together, an attorney
would have to amend the license part. She added that
amendments can be made to a lease.
Representative Neuman noted there were certain inducements
to companies that participated in the first open season
with the TransCanada proposal. If there was an alignment
with all the pipelines, he wondered if the same inducements
would follow through. Ms. Brown suggested the Department of
Revenue or Law could better answer the question. She added
that if they came together, both project applications and
leases can be amended.
Co-Chair Stoltze asked the Department of Revenue to come to
the next meeting with those answers.
Ms. Delbridge indicated that someone would be available to
answer questions for next meeting.
10:00:41 AM
MR. DAN FAUSKE, CEO/EXECUTIVE DIRECTOR OF ALASKA HOUSING
FINANCE CORPORATION (AHFC) AND PRESIDENT OF THE ALASKA
GASLINE DEVELOPMENT CORPORATION (via teleconference),
responded to Representative Wilson's question about the
tariff schedule and the assurance of gas for Fairbanks. The
tariffs that are anticipated for the entire Fairbanks
region are essential to maintain low tariffs for everyone
up and down the line. There would be no inducement to not
have the gas line going in, as it would drive up prices for
everyone. Fairbanks is essential in the overall production
and development of an affordable tariff schedule for all
the citizens using the pipeline.
Representative Edgmon commented on the intent language.
There is the term "lowest rate possible" that refers to
Fairbanks, South Central and communities in Alaska plus
another term "commercially reasonable" that applies to
public utilities and industrial customers. He wondered if
AGDC would be the sole authority to insure that the intent
of the bill is met for the lowest rates possible.
Ms. Delbridge agreed that AGDC is charged with providing
"commercially reasonable" service. They are also charged to
make sure the rates that go to the communities are as low
as can be. They do not want to roll more into the tariffs
then there has to be. State support in sand, water, and
gravel really become important. The legislative findings
are advisory, but AGDC also has that obligation written
under HB 369 and now Section 2, page 3 (a) and (b) of the
bill.
Representative Neuman asked if "commercially reasonable"
was a legal term. Ms. Delbridge responded it was not
defined anywhere. Representative Neuman remarked that
"lowest rate possible" was also an open ended definition.
Mr. Wright responded that a mission in HB 369 was "in the
most economic manner." They are still following the "lowest
rates possible" with all considerations.
10:05:24 AM
Mr. Dubler responded that the important thing to keep in
mind with the project is that it will not go forward
without a successful open season. The market will determine
what "commercially reasonable" rates are and what will be
the tariffs. If the tariffs are too high, the market will
indicate it is too high and will not proceed. The project
will not continue without firm commitments for the full
capacity of the pipeline.
Representative Guttenberg noted that the bill grants AGDC
considerable rights and privileges to build the pipeline.
Part of the bill and process is the eventuality if another
commercial interest comes in, referred to as the "successor
of interests." He questioned if someone else came in, would
the state given privileges to AGDC continue with the new
group.
Mr. Wright remarked that the Department of Law should
answer the question. He added that any lease transferred
still has to be signed off by the Commissioner of the
Department of Natural Resources.
MARTIN SCHULTZ, SENIOR ASSISTANT ATTORNEY GENERAL, OIL, GAS
& MINING SECTION, DEPARTMENT OF LAW, (via teleconference)
indicated that his understanding of the right-of-way
provision was that it could be transferred to a successor,
but the way the bill is written, the Department of Natural
Resources Commissioner would need to approve the transfer
of the right-of-way lease.
Co-Chair Stoltze asked about the bonding authority and the
eminent domain question.
Mr. Schultz responded that those are powers of the
Alaska Gasline Development Corporation under the bill and
those particular powers would remain with the corporation.
Ms. Delbridge replied that the question was answered by Mr.
Schultz.
Representative Doogan wondered if there are any estimates
for the cost of the spurs to rural hubs. Ms. Delbridge
replied that there are no plans for spurs to rural hubs.
The direction in the bill is for AGDC to begin analyzing if
commercially reasonable gas could be provided to other
communities, but only after construction begins on the main
line.
Mr. Dubler responded that on page 4, line 5-17, provides
the direction to AGDC to begin looking for additional
natural gas pipelines connecting to industrial,
residential, or utility customers in other regions in the
state, after the beginning the construction of the main
line. The idea was to get the program underway and not
presently look at other areas. There are a lot of factors
that go into the costs of connecting to a natural gas
pipeline. The first and largest component is the
composition of the gas going through the line. To the
extent that it is a rich stream, which was the initial
plan, the cost is prohibitive for smaller communities
because an expensive straddle plant would need to be built
at every location. The cost would be much lower if it was a
utility grade gas stream from the main line. The closer to
the main line, the cheaper it would be.
10:12:15 AM
Representative Doogan understood that it might be
difficult, but believed there must be some initial
estimates of what the project would cost. If bringing gas
to a rural area, then there needs to be an idea of the
costs. He indicated that was a big concern to him and he
needed a better idea of what he was voting on.
Mr. Wright interjected that the main charge for AGDC,
established in HB 369, was to look at a main line, not to
spend a lot of money or time engineering or providing costs
estimates to other regions of the state. Representative
Doogan remarked that HB 9 is the bill being considered and
if there is a provision for hubs, then there needs to be an
estimate to the hubs. He asked if there was a way to do
that intelligently. Mr. Wright agreed it was the
legislature's prerogative to insert and consider other
language.
10:15:29 AM
Representative Gara noted that last session HB 369 was
passed where $200 million was put into a fund for studies
and other work. He wanted a detailed description of what
has been passed so far and an answer to why HB 9 was
needed. He noted that when the previous bill was passed, he
had not envisioned having it followed the next year with a
bill like HB 9.
Mr. Wright informed that the $200 million is still sitting
in a fund because the in-state gasline fund has not been
established. Ms. Delbridge informed Representative Gara
that they would be happy to provide the information.
Co-Chair Stoltze WITHDREW his objection to the committee
substitute.
Committee Substitute for HB 9 was ADOPTED as a working
document.
HB 9 was HEARD and HELD in committee for further
consideration.
10:17:57 AM
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 78 DHSS response 3-12-12.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 78 |
| HB 182 - Sectionalpdf.pdf |
HFIN 3/16/2012 9:00:00 AM SSTA 4/11/2012 9:00:00 AM |
HB 182 |
| HB 182 - Sectional.docx |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB 182 - OMB Report Summary.pdf |
HFIN 3/16/2012 9:00:00 AM SSTA 4/11/2012 9:00:00 AM |
HB 182 |
| HB 182 - Backup Leg Research 2011.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB182CS(STA)-NEW FN-GOV-OMB-3-03-2012.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB182 Amendment 1 Gara.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB009CS(RES)-NEW CSDOR-AHFC-03-12-12 Attachment.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 9 |
| HB009CS(RES)NEW CS-DOR-AHFC-03-12-12.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 9 |
| HB 9 CS Workdraft K version Summary of Changes.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 9 |
| HB9 CS WORKDRAFT Kversion 3.16.12.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 9 |
| HB 182 R VERSION SECTIONAL.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB 182 CS WORKDRAFT 27-LS1057-R.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 182 |
| HB078CS(FIN)-NEW CS-DHSS-HPSD-3-16-12.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 78 |
| HB9 Gara Handout 3.16.12.pdf |
HFIN 3/16/2012 9:00:00 AM |
HB 9 |