Legislature(2011 - 2012)HOUSE FINANCE 519

04/15/2012 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
Moved HCS CSSB 136(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved HCS CSSSSB 25(L&C) Out of Committee
Moved Out of Committee
Moved HCS CSSB 119(FIN) Out of Committee
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 25(FIN)                                                                         
     "An   Act    establishing   the    sustainable   energy                                                                    
     transmission  and  supply  development program  in  the                                                                    
     Alaska  Industrial  Development and  Export  Authority;                                                                    
     relating   to  the   interest  rates   of  the   Alaska                                                                    
     Industrial  Development   and  Export   Authority;  and                                                                    
     relating to  taxes paid on interests  in property owned                                                                    
     by  the   Alaska  Industrial  Development   and  Export                                                                    
     Authority  and to  the  local  contribution for  public                                                                    
     education funding related to that property."                                                                               
MICHAEL PAWLOWSKI,  STAFF, SENATOR LESIL  MCGUIRE, addressed                                                                    
the legislation.  He pointed to numerous  letters of support                                                                    
included in  members' packets (copy  on file).  He explained                                                                    
that  the  bill represented  a  piece  of the  legislature's                                                                    
ongoing work  related to energy infrastructure.  In 2010 the                                                                    
sponsor  had  identified  a  major   gap  in  the  need  for                                                                    
financing  and  access to  capital.  He  discussed that  the                                                                    
legislature had  done an excellent  job of  developing grant                                                                    
programs and  support for energy and  infrastructure, but no                                                                    
real mechanism  existed to provide  capital for  projects to                                                                    
move forward on their own.                                                                                                      
Mr. Pawlowski walked the  committee through the legislation.                                                                    
Section 1  included the short title  "the Alaska Sustainable                                                                    
Strategy  for Energy  Transmission  and  Supply." Section  2                                                                    
(pages 1 through 3) included  conforming language that added                                                                    
the   word  "energy"   into   the   findings  section   that                                                                    
established  the Alaska  Industrial  Development and  Export                                                                    
Authority (AIDEA) within the state's  public laws. Section 3                                                                    
added  conforming language  related to  AIDEA in  the duties                                                                    
section.  He accentuated  the importance  of Section  4 that                                                                    
established a  separate fund within AIDEA  and empowered the                                                                    
fund  to finance  energy  infrastructure  projects with  the                                                                    
private  sector.  The  sponsor  did  not  want  to  displace                                                                    
efforts  of   the  private  sector;  therefore,   Section  4                                                                    
included amendments  to AIDEA's existing  loan participation                                                                    
program adding qualified  energy developments. The authority                                                                    
could  work  with  banks  to  provide  credit  backstops  if                                                                    
commercial   lending   institutions   were   interested   in                                                                    
financing energy projects.                                                                                                      
Mr.  Palowski  moved  to  Section 6  (pages  5  through  7),                                                                    
outlining that AIDEA was not  allowed to give away money and                                                                    
was required  to earn a  rate of interest that  exceeded the                                                                    
cost of its  funds when making loans.  The sections required                                                                    
AIDEA  to  achieve  an interest  rate  similar  to  existing                                                                    
requirements; it  had to exceed  the minimum cost  of funds.                                                                    
Section 11  (page 7) allowed  AIDEA to provide  an incentive                                                                    
interest   rebate  of   up  to   1  percent   under  certain                                                                    
circumstances;  page  7,  line  24 allowed  the  rebate  for                                                                    
renewable  energy   and  rural  and   economic  development.                                                                    
Section  12  created the  fund  separately  within AIDEA  in                                                                    
order to  protect the authority's existing  credit rating on                                                                    
its existing programs. The  authority's powers were expanded                                                                    
on page  9 in two  material ways:  (1) the ability  to defer                                                                    
principal  payments  or  capitalize  interest  on  qualified                                                                    
energy  developments,  which  would help  to  drive  project                                                                    
economics down  and (2) the  ability to guarantee  loans and                                                                    
bonds  to extend  out for  hydroelectric  development to  50                                                                    
Mr.  Palowski addressed  that page  10, lines  9 through  12                                                                    
included  a  limitation  specifying that  AIDEA  could  only                                                                    
finance one-third  of a  project's costs  without additional                                                                    
approval by the  legislature. He detailed that  the fund was                                                                    
intended to  be co-invested  capital along with  the private                                                                    
sector;  the goal  was  not  to have  AIDEA  go "whole  into                                                                    
projects."  The   goal  was  to  leverage   investment  that                                                                    
utilities,  mineral  development companies,  and  developers                                                                    
were  making  around the  state.  The  fund was  limited  to                                                                    
qualified energy developments (defined  on page 10, line 23)                                                                    
including  transmission, generation,  conservation, storage,                                                                    
or distribution of heat or  electricity, natural gas (except                                                                    
large  pipelines in  Cook  Inlet or  the  North Slope),  and                                                                    
refined petroleum products.                                                                                                     
11:08:32 AM                                                                                                                   
Vice-chair Fairclough MOVED the bill before the committee.                                                                      
Representative  Neuman asked  for a  definition of  the term                                                                    
"rural  development" included  on page  7, line  23. He  had                                                                    
many  areas of  his district  that were  without electricity                                                                    
transmission lines.  Mr. Pawlowski deferred the  question to                                                                    
the department.                                                                                                                 
MARK DAVIS,  DEPUTY DIRECTOR, ALASKA  INDUSTRIAL DEVELOPMENT                                                                    
AND EXPORT AUTHORITY, DEPARTMENT  OF COMMERCE, COMMUNITY AND                                                                    
ECONOMIC DEVELOPMENT, replied that  AIDEA was in the process                                                                    
of  adopting   regulations  underneath  an   existing  rural                                                                    
provision. The  agency intended to adopt  a broad definition                                                                    
that  would  encompass  small communities;  the  distinction                                                                    
made between  "roadless" and "road"  was not  effective from                                                                    
an economic  standpoint. He expounded  that AIDEA  looked at                                                                    
economic data  on how each  community was doing,  the amount                                                                    
of capital  in each  community, and  census data  on poverty                                                                    
Representative  Neuman explained  that Houston,  Alaska only                                                                    
had 1,500 residents  and that there were  areas three blocks                                                                    
from  his  house that  were  without  electricity. He  asked                                                                    
whether  the   bill  would  allow  the   Matanuska  Electric                                                                    
Association  (MEA) to  get loans  to expand  the community's                                                                    
current  system  through  AIDEA   loans.  He  stressed  that                                                                    
"rural" did  not just encompass  off the  road-system areas.                                                                    
Mr. Davis  responded that  the bill would  allow for  MEA to                                                                    
work with AIDEA to expand the area's grid.                                                                                      
Representative Edgmon  discussed a bill that  had passed the                                                                    
prior day  related to new  tax credits. He  wondered whether                                                                    
an  applicant  would  be  able   to  utilize  both  programs                                                                    
established  in  the  bills.  Mr.  Davis  responded  in  the                                                                    
Co-Chair Thomas CLOSED public testimony.                                                                                        
Representative Wilson  asked whether the liquid  natural gas                                                                    
plant on  the North Slope  would qualify under  the program.                                                                    
Mr.  Pawlowski pointed  to  language on  page  10, lines  27                                                                    
through  29  that  specifically   excluded  a  gas  pipeline                                                                    
project for the  transportation of gas from  the North Slope                                                                    
or   Cook    Inlet   to   market;    however,   liquefaction                                                                    
regasification distribution was included;  the bill had been                                                                    
designed specifically to work with the project.                                                                                 
11:12:47 AM                                                                                                                   
Representative Doogan discussed that  AIDEA had a history of                                                                    
projects going  bankrupt. He  wondered how  AIDEA's policies                                                                    
had changed in order to prevent the issue from happening.                                                                       
Mr. Davis replied that AIDEA  had issued a strategic plan in                                                                    
2008 in  which underwriting standards had  been changed. The                                                                    
bill  was  consistent with  board  policy  that allowed  the                                                                    
authority   to  only   invest   up   to  one-third   without                                                                    
legislative  approval. The  change had  been implemented  to                                                                    
reduce  risk and  to work  with partners  who did  their due                                                                    
diligence.  He relayed  that the  agency would  probably aim                                                                    
for a  1.25 to 1.34 debt  service ratio on a  revolving fund                                                                    
such  as  the one  included  in  the legislation  and  would                                                                    
establish the guideline in regulation.                                                                                          
Vice-chair Fairclough  directed attention to the  two fiscal                                                                    
notes. The  first fiscal note  was fund  capitalization with                                                                    
an  allocation to  the Sustainable  Energy Transmission  and                                                                    
Supply Development Fund in the  amount of $1.25 million. The                                                                    
second fiscal note  had zero fiscal impact  and affected the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
related to AIDEA.                                                                                                               
Co-Chair  Thomas asked  whether  there would  be a  regional                                                                    
spread required  to prevent all  of the money from  going to                                                                    
one region. Mr. Davis responded  that the AIDEA board wanted                                                                    
to  achieve  a  geographic disbursement  of  investment  and                                                                    
included related  requirements. The board was  provided with                                                                    
statistics  about how  each loan  in the  Loan Participation                                                                    
Program affected each  region; the same thing  would be done                                                                    
for the program under the bill.                                                                                                 
Representative  Neuman asked  why the  language on  page 10,                                                                    
line 29  was limited to the  North Slope and Cook  Inlet. He                                                                    
wondered why language did not  just read "within Alaska." He                                                                    
detailed  that there  was a  significant amount  of industry                                                                    
including  Native corporations  looking at  non-conventional                                                                    
gas  plays  and  exploration  within the  state  that  could                                                                    
probably take advantage of the legislation.                                                                                     
Mr. Pawlowski  clarified that the  North Slope  language was                                                                    
an  exclusion.   He  detailed  that   the  other   areas  be                                                                    
acceptable  under  the  bill   including  the  Nenana  Basin                                                                    
Pipeline and other.  The only items excluded  under the bill                                                                    
were related  to specific pipeline  projects from  the North                                                                    
Slope or Cook Inlet to market.                                                                                                  
11:16:26 AM                                                                                                                   
Co-Chair Thomas  noted that the operating  budget conference                                                                    
committee  had  closed out  with  the  bill funding  in  its                                                                    
fiscal notes.  He explained that  the fiscal note  needed to                                                                    
travel with the bill.                                                                                                           
Vice-chair  Fairclough MOVED  to report  HCS CSSSSB  25(L&C)                                                                    
out  of committee  with individual  recommendations and  the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
HCS CSSSSB 25(L&C) was REPORTED  out of committee with a "do                                                                    
pass" recommendation and with  one previously published zero                                                                    
fiscal note: FN2 (CED); and  one previously published fiscal                                                                    
impact note: FN3 (SFIN/CED).                                                                                                    
11:17:25 AM                                                                                                                   
AT EASE                                                                                                                         
11:22:55 AM                                                                                                                   

Document Name Date/Time Subjects
Legislative Research Report AIDEA.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
Letters of support for SB 25.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
REAP SB25.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
SB 25 Power Point Presentation H L&C Version.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
Sectional Analysis HCS CS SS SB 25 L&C.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
SP Alaska Industrial Development Export Authority Rating Report.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
Sponsor Statement Senate Bill 25 Feb 2012.pdf HFIN 4/15/2012 9:00:00 AM
SB 25
SB136.Supporting Documents-Leg Research.Vet Tax Credit Report.12.28.11 (1).pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136.Supporting Documents-Article AK Business Monthly.Hiring Military Veterans is Good Business.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136.Support Letters - business owners, vets helping vets, etc..pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136.Sponsor Statement.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136.Article.states try to help veterans find jobs.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136 Summary of Changes.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB136 Sectional Analysis.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB119 Supporting Documents-AATA Handout.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 US Bureau of Labor Statistics Athletic Trainers.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119
SB 119 Support Letters 24.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Support Letter AAFP.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Support Information Case for HS Activities.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Sponsor Statement HFIN.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Other States Chart Comparison.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 NATA Handout on Certified Athletic Trainers.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Ltr of Supt AATA.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Comparison of Participation Laws.docx HFIN 4/15/2012 9:00:00 AM
SB 119
SB 119 Athletic Training Educational Overview.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB119 CS WORKDRAFT Uversion.pdf HFIN 4/15/2012 9:00:00 AM
SB 119
SB136 WORKDRAFT 27-LS0983-U.pdf HFIN 4/15/2012 9:00:00 AM
SB 136
SB53 Handout.pdf HFIN 4/15/2012 9:00:00 AM
SB 53
SB53 Additional Support.pdf HFIN 4/15/2012 9:00:00 AM
SB 53