Legislature(2017 - 2018)GRUENBERG 120

03/06/2017 01:00 PM JUDICIARY

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Heard & Held
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Heard & Held
            HB 120-DEPT OF LAW: ADVOCACY BEFORE FERC                                                                        
1:19:14 PM                                                                                                                    
CHAIR CLAMAN announced that the  first order of business would be                                                               
HOUSE BILL  NO. 120, "An  Act relating  to the Department  of Law                                                               
public  advocacy function  to participate  in  matters that  come                                                               
before the Federal Energy Regulatory Commission."                                                                               
1:19:41 PM                                                                                                                    
CLYDE   "ED"  SNIFFEN,   Chief   Statewide  Section   Supervisor,                                                               
Regulatory Affairs  & Public Advocacy  (RAPA), Department  of Law                                                               
(DOL), explained that  HB 120 is a fairly simple  bill in that it                                                               
allows the  Department of Law (DOL)  to include some of  the work                                                               
it  currently  performs  before  the  Federal  Energy  Regulatory                                                               
Commission as  part of  the budget, and  seeks to  use regulatory                                                               
cost charge funds.  He  explained that all regulated utilities in                                                               
the state are  subject to oversight by  the Regulatory Commission                                                               
of Alaska (RCA)  and to pay for that  regulatory oversight, there                                                               
is a  regulatory cost charge that  appears on utility bills.   He                                                               
described it  as a  small amount  that goes  into this  fund, and                                                               
that  fund pays  for the  cost  of regulation  for pipelines  and                                                               
regulated utilities.   The attorney  general has the  function of                                                               
protecting the public  interest in these matters  before the RCA.                                                               
The Department of Law (DOL) appears  in matters before the RCA to                                                               
protect the public  from unnecessary rate hikes  and protects the                                                               
public's  interest  in  making  sure those  rates  are  just  and                                                               
reasonable,  which  is  paid for  through  this  regulatory  cost                                                               
charge.  Recently,  he explained, the department  found that many                                                               
matters  are  before  the Federal  Energy  Regulatory  Commission                                                               
(FERC), and as  the department works to limit its  use of outside                                                               
counsel,  it spends  a lot  of  time on  FERC matters  now.   The                                                               
department  would like  to charge  some of  that work  toward the                                                               
regulatory  cost   charge  and,  he  pointed   out,  the  statute                                                               
recognizes that through the pipeline  regulatory cost charge that                                                               
that is entirely appropriate.                                                                                                   
MR. SNIFFEN  noted that the  total amount of the  regulatory cost                                                               
charge is  capped, which is set  by the legislature, and  it is a                                                               
certain  amount of  adjusted gross  revenues from  the utilities,                                                               
and  the  department  gets  to  use .17  percent  of  that.    He                                                               
explained that  the department  sets a  budget every  year within                                                               
that cap on how it believes it  will spend its money.  This bill,                                                               
he  explained,  would allow  the  department  the flexibility  to                                                               
allocate its funds  among pipeline and utility matters  in a more                                                               
efficient   way  and;   therefore,   utilize   its  budget   more                                                               
efficiently.  Those  are funds that would normally  be charged to                                                               
the  general   fund  that  DOL   could  now  charge   through  an                                                               
appropriate use  of the regulatory  cost charge.  He  referred to                                                               
the handout  he provided and  said it  explains the bill,  and he                                                               
would be happy to answer any questions.                                                                                         
1:22:51 PM                                                                                                                    
REPRESENTATIVE EASTMAN acknowledged that  he is not familiar with                                                               
how  the   functions  of  the  attorney   general's  office  were                                                               
established in the statutes, and  asked why the legislature needs                                                               
to create a statutory provision  to permit the attorney general's                                                               
office to  do something that  the attorney general has  deemed is                                                               
in the public's interest.                                                                                                       
MR. SNIFFEN  responded that he believes  Representative Eastman's                                                               
question was in reference to  these public interest functions the                                                               
attorney general pursues in statute  versus not being an inherent                                                               
power of  the attorney general.   He said he was  unsure he could                                                               
answer  the  statutory  history,  but  the  attorney  general  is                                                               
charged with  enforcing certain public interest  functions of the                                                               
state.    For  example,  the consumer  protection  functions  are                                                               
things the  attorney general  does just  to protect  the public's                                                               
interest,  and  the function  through  the  Regulatory Affairs  &                                                               
Public Advocacy  Section is another  one of those.   He commented                                                               
that perhaps without those directions  it would be more difficult                                                               
in  this rapid  context, for  example,  to get  funding for  that                                                               
function.  The way the  attorney general's authority is laid out,                                                               
those are the things she's been  charged with doing and why there                                                               
are not others in there, he could not speak to that question.                                                                   
1:24:27 PM                                                                                                                    
REPRESENTATIVE EASTMAN offered a  scenario that the Department of                                                               
Environmental Conservation  (DEC) was going through  its process,                                                               
and he asked  whether something is needed in statute  to give the                                                               
attorney  general  the opportunity  to  participate  in a  public                                                               
advocacy role.                                                                                                                  
MR.  SNIFFEN  answered that  it  depends  upon  the role  of  the                                                               
attorney  general.   He explained  that the  attorney general  is                                                               
charged  with  representing the  agency  that  would enforce  the                                                               
state's  environment  protection  laws,   so  the  Department  of                                                               
Environmental  Conservation (DEC),  for example,  is a  client of                                                               
the attorney  general.  The  attorney general will  provide legal                                                               
advice to that  agency to the extent that the  agency is pursuing                                                               
whatever remedies for whatever case it is pursuing, he advised.                                                                 
1:25:17 PM                                                                                                                    
REPRESENTATIVE KOPP  said that, clearly,  the department is  in a                                                               
predicament  with its  advocacy  role,  and the  way  the law  is                                                               
structured  now it  makes it  difficult for  any costs  recovery.                                                               
This bill resolves  that, and he described it as  a good piece of                                                               
1:25:44 PM                                                                                                                    
REPRESENTATIVE REINBOLD referred to the  fees people pay on their                                                               
utilities bills, and asked whether  those are the fees that would                                                               
be used by the attorney general to go before FERC.                                                                              
MR. SNIFFEN offered  a qualified yes.  He explained  that it is a                                                               
complicated process  in that DOL  establishes a budget  each year                                                               
that  goes before  the RCA,  and that  budget is  limited by  the                                                               
legislature.   The  RCA approves  that budget,  and depending  on                                                               
what sectors  received DOL's attention  throughout the  year, for                                                               
example, if DOL  had a year that was heavily  weighted toward gas                                                               
regulation versus electric or waste  water, then a bigger portion                                                               
of  the regulatory  cost charge  would  be assessed  for the  gas                                                               
utilities, and vice versa.  He  advised that it is a process that                                                               
equalizes among the sectors fairly,  and then that gets passed on                                                               
to the utilities, and the utilities  can pass it on to their rate                                                               
payers if  they so choose.   The rate payers see  that small line                                                               
item  bill  at  the  bottom  of their  utility  bill,  $0.17,  or                                                               
whatever, for the regulatory cost charge, he explained.                                                                         
1:27:10 PM                                                                                                                    
REPRESENTATIVE  REINBOLD surmised  that  the  people pay  through                                                               
their  utility bills  for the  attorney general  to perform  work                                                               
before the federal  government, which is another  way to increase                                                               
the size  of government.  She  asked "Why now," and  whether this                                                               
has  anything  to  do  with  the gas  line,  LNG  project.    She                                                               
explained  that stories  hit  the news  where  the governor  just                                                               
asked the current  national administration for "a  whole bunch of                                                               
help and loopholes  for the state government to get  out of doing                                                               
things that the private sector ought to do."                                                                                    
MR. SNIFFEN replied  absolutely not.  He stressed  that this will                                                               
not affect  the governor's gas  line at all.   The issue  came to                                                               
DOL's attention  now, because  over the last  couple of  years it                                                               
was tasked  with finding  ways to  save money,  and one  of those                                                               
ways was to reduce the  department's reliance on outside counsel.                                                               
The  FERC work  has  been  performed by  outside  counsel for  30                                                               
years, and  the department  is now bringing  that work  in house,                                                               
thereby, saving significant  amounts of money for the  state.  It                                                               
recently came  to the department's  attention that it  was unable                                                               
to pass some of those costs  on to the shippers and the customers                                                               
who are  benefiting from the  department's work.  The  FERC piece                                                               
is  one piece  the department  saw where  it performed  work that                                                               
benefited  the  public's  interest,  and  it  could  be  properly                                                               
included  within  the  pipeline   regulatory  cost  charge.    He                                                               
estimated  that the  people  who would  probably  absorb most  of                                                               
this, if anything, would be the  shippers of oil on the pipeline,                                                               
and not  to the normal utility  customers.  He said  he suspected                                                               
that  the regulatory  cost charge  for a  person's water  bill or                                                               
electric bill would not be affected at all.                                                                                     
1:29:09 PM                                                                                                                    
CHAIR  CLAMAN  referred  to  Representative  Reinbold's  question                                                               
regarding  charging   the  consumers,  and  responded   that  the                                                               
legislature made  the decision many  years ago for  utility bills                                                               
to  be part  of the  consumer  protection function.   The  public                                                               
would want the attorney general's  office involved in rate paying                                                               
cases, and  the legislature determined that  the attorney general                                                               
could participate, but could only  charge .17 percent in terms of                                                               
paying the  attorney general to perform  that consumer protection                                                               
function.    This bill  is  not  actually adding  new  collection                                                               
authority, he explained,  it is more about  allowing the attorney                                                               
general's office to have more flexibility  in what it can do with                                                               
the .17 percent it is already collecting.                                                                                       
MR. SNIFFEN replied that that is absolutely correct.                                                                            
1:30:05 PM                                                                                                                    
REPRESENTATIVE  REINBOLD asked  whether this  has anything  to do                                                               
with the  current gas  pipeline, and reiterated  "why now."   She                                                               
acknowledged that  Mr. Sniffen  explained it  was to  save money,                                                               
but that  she finds  this intriguing timing.   She  asked whether                                                               
this will impact any private  businesses, the budget, or the rate                                                               
MR. SNIFFEN  reiterated that  the answer  to "why  now" is  in an                                                               
effort to reduce  its reliance on outside counsel  and bring some                                                               
of  the FERC  work in  house due  to budget  considerations.   He                                                               
further  reiterated that,  as to  the timing  issue, it  recently                                                               
came to the department's attention  that the department is unable                                                               
to use  this fund  to pay for  some of the  FERC work  that would                                                               
otherwise be before  the RCA, but for  the need to do  it at FERC                                                               
first.   In response to  whether it has  anything to do  with the                                                               
governor's new pipeline, he reiterated that it does not.                                                                        
REPRESENTATIVE  REINBOLD said  she  asked who  would be  impacted                                                               
now, such as any business in Alaska, or any rate payer.                                                                         
1:31:56 PM                                                                                                                    
MR.  SNIFFEN  reiterated  that  the   people  who  pay  into  the                                                               
regulatory cost  charge are  all of  the regulated  utilities and                                                               
pipelines.  The  work on FERC would be a  pipeline related issue,                                                               
so the people impacted by this  would be shippers on the pipeline                                                               
and they  would have to pay  the regulatory cost charge  if there                                                               
was an increase.                                                                                                                
REPRESENTATIVE REINBOLD asked who the  shippers are on the Trans-                                                               
Alaska Pipeline System (TAPS), and who it will impact.                                                                          
MR. SNIFFEN  answered that  the shippers on  TAPS include  all of                                                               
the major  producers, shippers, and  also intrastate  shippers on                                                               
the  pipeline which  includes the  Tesoro  Corporation and  Petro                                                               
Star  Inc.,  because  they  pay  intrastate  tariffs  to  receive                                                               
product off of the pipeline as well.                                                                                            
1:32:56 PM                                                                                                                    
REPRESENTATIVE REINBOLD  asked what kind  of impact it  will have                                                               
because it sounds like the attorney  general will now "do a bunch                                                               
of  work," maybe  before  the FERC  Regulatory  Commission.   She                                                               
asked  what kind  of expenses  would  be incurred,  and what  the                                                               
state would ask the private sector to pay in this recession.                                                                    
MR. SNIFFEN responded that it is hard  to say, but it will not be                                                               
an amount  that is very noticeable.   Depending each year  on how                                                               
the  department's budgets  fall out,  if it  allocates a  certain                                                               
percentage of its  time toward this FERC work, that  cost will be                                                               
passed on  to the shippers,  they will  pass it on  through their                                                               
tariffs,  and  those tariffs  are  spread  out over  millions  of                                                               
barrels of  product.   The customers who  buy that  product would                                                               
ultimately  pay that  price which,  he opined,  would be  a small                                                               
1:34:02 PM                                                                                                                    
REPRESENTATIVE REINBOLD said this  impacts the private sector and                                                               
she  requested  the  name  of  every  shipper  this  economically                                                               
impacts  because they  have  investments over  a  long period  of                                                               
time,  and this  is another  way to  get into  another pocket  of                                                               
theirs.  It is important to  understand the impact to the private                                                               
sector before passing legislation, she said.                                                                                    
1:34:56 PM                                                                                                                    
CHAIR CLAMAN queried as to whether  she was asking Mr. Sniffen to                                                               
provide the name  of any customer, not just  for the Trans-Alaska                                                               
Pipeline System (TAPS),  but any customer of any  type that could                                                               
be impacted  by this particular  bill allowing the  department to                                                               
participate in FERC matters.                                                                                                    
REPRESENTATIVE  REINBOLD clarified  that  she is  asking for  the                                                               
information  regarding this  bill particularly,  and who  will be                                                               
impacted directly.                                                                                                              
CHAIR  CLAMAN noted  that there  is TAPS,  within which  contains                                                               
some intrastate  and interstate  regulations, and  the intrastate                                                               
is regulated by RCA, which is  Tessoro and others that refine oil                                                               
in  the state  who take  the oil  off the  pipe.   Everything, he                                                               
explained,  that goes  out  is regulated  by  the Federal  Energy                                                               
Regulatory Commission  (FERC).   He then asked  for clarification                                                               
whether she is just asking about  people involved in the TAPS, or                                                               
asking about  any utility bill  or anything else that  might come                                                               
before FERC.                                                                                                                    
1:36:02 PM                                                                                                                    
REPRESENTATIVE REINBOLD  explained that she is  asking for anyone                                                               
who  would  be  impacted  by  this bill  overall  so  they  could                                                               
prepare,  she  said  to  look  at  the  intended  and  unintended                                                               
consequences of HB 120.                                                                                                         
MR.  SNIFFEN  explained  that  the  regulatory  cost  charge  for                                                               
pipelines is  assessed on all  pipelines operating in  the state,                                                               
and he will provide the list of the pipeline operators.                                                                         
REPRESENTATIVE REINBOLD  said that was  not exactly what  she was                                                               
CHAIR  CLAMAN pointed  out  that  that was  the  question he  was                                                               
asking  because  when  one  asks  the impact  of  a  .17  percent                                                               
regulatory  cost charge,  he related  that  it impacts  everyone.                                                               
For example, he  said, Chugach Electric also has  the .17 percent                                                               
factored in;  therefore, not  only does the  utility pay  it, but                                                               
the utility passes it on to  the consumer, which means there is a                                                               
component in  which everyone is affected.   He said he  is trying                                                               
to get  some clarity as to  who she wants Mr.  Sniffen to provide                                                               
information  for  because  the  universe  could  be  everyone  in                                                               
Alaska, or a small number of people  who own TAPS.  He said that,                                                               
frankly, he is  confused by the question himself,  and it appears                                                               
Representative Reinbold is not happy with Mr. Sniffen's answers.                                                                
1:37:54 PM                                                                                                                    
REPRESENTATIVE REINBOLD clarified  that Mr. Sniffen can  do it in                                                               
aggregate, but  if a  municipality or consumers,  or if  only the                                                               
shippers of  TAPS are  impacted, she  would like  to know  in the                                                               
short term  and the  long term.   Alaska is  in a  recession with                                                               
massive deficits and Alaska's economy  is delicate, and sometimes                                                               
a tiny change can have a huge impact, she said.                                                                                 
MR.  SHIFFEN   said  he  understands   Representative  Reinbold's                                                               
question  and that  the impacts  would  be only  to the  pipeline                                                               
operators   in   Alaska,  it   will   not   be  passed   to   the                                                               
municipalities,  or to  the RCC  contributors.   The department's                                                               
FERC  work deals  with  tariffs  on the  TAPS  pipeline, and  the                                                               
people  who  pay  those  tariffs  are  the  people  who  will  be                                                               
impacted.  Currently, he reiterated,  the intrastate tariffs paid                                                               
in the state are only by two companies, Tessoro and Petro Star.                                                                 
1:39:14 PM                                                                                                                    
REPRESENTATIVE  LEDOUX   referred  to  Mr.   Shiffen's  testimony                                                               
wherein  only the  tariff payers  will  be impacted  by the  FERC                                                               
portion of  this, and noted  that all  of the expenses  get split                                                               
with everyone.                                                                                                                  
MR. SNIFFEN explained  that the department estimates  how much of                                                               
its time  will be spent  on pipeline  matters, and how  much time                                                               
will  be  spent  on  utility matters.    Within  those  different                                                               
sectors  it breaks  it  down even  further on  how  much time  is                                                               
between the  different types of  utilities.  The amount  of money                                                               
the pipeline shippers  would pay into the  regulatory cost charge                                                               
is  what  might  be  affected by  the  department's  decision  to                                                               
perform more FERC work versus other utility work, he explained.                                                                 
1:40:17 PM                                                                                                                    
REPRESENTATIVE KOPP  voiced his understanding that  the state has                                                               
year-to-year appropriations  for FERC  work to the  Department of                                                               
Law  (DOL),  and  those  have   to  be  appropriated  each  year.                                                               
Therefore, he said,  the legislature would have  the authority to                                                               
not make appropriations if it so desired.                                                                                       
MR.  SNIFFEN  responded  that  that is  not  quite  correct,  the                                                               
legislature can  make appropriations  to the department,  and the                                                               
department  does  use  general  fund money  for  its  FERC  work,                                                               
1:40:55 PM                                                                                                                    
REPRESENTATIVE KOPP  asked whether  there is  a projection  as to                                                               
the   cost  impacts   the  legislature   can   expect  from   the                                                               
department's  work, not  being paid  now but  going forward  as a                                                               
result of this legislation.                                                                                                     
MR. SNIFFEN answered  that he did not think the  total amount the                                                               
department would  spend, in addition  to what it  already spends,                                                               
as a result of this bill  would change that much.  The department                                                               
is operating  under the cap  set by the legislature  already, and                                                               
it is pretty  close to that cap with its  current budgets.  There                                                               
are some  not used, which  is carried  forward to the  next year,                                                               
and if the department  is able to put some of  its FERC work into                                                               
that pot of money,  it may fill it up a little more.   He said it                                                               
is  difficult to  predict,  but it  will be  in  the hundreds  of                                                               
thousands  of dollars  or  less,  it certainly  is  not into  the                                                               
several  hundred  thousand  or  even  the  million  range.    The                                                               
department  set its  budget  where it  is, and  if  it uses  that                                                               
budget performing  utility work,  great - and  if it  isn't used,                                                               
then it goes into  the next year's cycle, he said.   In the event                                                               
the department  is able  to use  some FERC work  and put  it into                                                               
that  pot of  money  as well,  then the  department  might use  a                                                               
little more of  that.  Therefore, it would be  less money rolling                                                               
over  to  the   next  year  depending  on  where   the  work  was                                                               
concentrated,  but  it  is  not   a  huge  amount  of  money,  he                                                               
1:43:07 PM                                                                                                                    
REPRESENTATIVE KOPP  offered that  his understanding of  the bill                                                               
was that it  wasn't so much generating new revenue  as it was the                                                               
department  having   access  to   receipts  that   are  currently                                                               
collected,  in   a  manner  that  is   currently  unavailable  to                                                               
department when it advocates for FERC matters.                                                                                  
MR. SNIFFEN answered that Representative Kopp was correct.                                                                      
1:43:32 PM                                                                                                                    
REPRESENTATIVE  KREISS-TOMKINS   asked  the   exact  relationship                                                               
between  the 0.7  percent statutory  cap on  RCC regulatory  cost                                                               
charge,  and  the  relationship  between that  0.7  and  the  .17                                                               
percent that can go to the  Department of Law (DOL), and where it                                                               
goes, he asked.                                                                                                                 
1:44:16 PM                                                                                                                    
MR. SNIFFEN responded  that there is a statutory  0.7 percent cap                                                               
and a .17  percent cap.  The  0.7 percent is what is  used by the                                                               
regulatory  commission  to  fund  its  operations,  and  the  .17                                                               
percent  is  what  the  department uses  to  perform  its  public                                                               
advocacy functions.                                                                                                             
REPRESENTATIVE  KREISS-TOMKINS surmised  that  if  this piece  of                                                               
legislation  passes and  the department  is able  to start  using                                                               
this to  reimburse its  FERC work,  is that  money coming  to the                                                               
department because,  currently, the department  is not up  to the                                                               
.17  percent  cap and  there  is  a  delta between  whatever  the                                                               
department is right now, and .17 percent.                                                                                       
MR.  SNIFFEN   said  Representative  Kreiss-Tomkins   is  exactly                                                               
correct, that delta  is the only thing that would  be affected by                                                               
this  bill.   He offered  that the  department might  shrink that                                                               
delta a bit  in some years, and  it might not, because  it may be                                                               
able to cover the department's  costs with the money it currently                                                               
spends by the way it  allocates money among the utility functions                                                               
and  its  FERC  functions.    That's  the  delta  that  could  be                                                               
affected,  for example,  he advised,  in  2017 it  was less  than                                                               
$40,000, and  as the  department's budgets  unfold, no  one knows                                                               
what it will be in future years.   He explained that this bill is                                                               
not more  about increasing that cap  because the cap is  the cap,                                                               
but rather the bill gives  the department the flexibility to move                                                               
money under the cap among the functions the department performs.                                                                
1:46:02 PM                                                                                                                    
REPRESENTATIVE  KREISS-TOMKINS surmised  that  the department  is                                                               
not at  the delta, and  asked approximately where  the department                                                               
is in terms of percentage.                                                                                                      
MR. SNIFFEN responded that he does  not have the exact number but                                                               
it is  closer to .167,  and that  is what the  department budgets                                                               
for   every  year.     He   reiterated  the   department  doesn't                                                               
necessarily use all of that  budgeted money, but when it predicts                                                               
what its costs would be, it is pretty close.                                                                                    
1:47:08 PM                                                                                                                    
REPRESENTATIVE  KREISS-TOMKINS  surmised  that  this  bill  would                                                               
allow the department to close  that 0.03 gap, $40,000 or whatever                                                               
it ends up being.  He noted that  the department is not up to its                                                               
cap currently,  and whether that  means the RCA  is participating                                                               
in these extra  0.03 percent of overall utility funds.   He asked                                                               
where the delta  would go in the event the  department was not at                                                               
its cap.                                                                                                                        
MR. SNIFFEN reiterated that it is  carried over to the next cycle                                                               
and it is considered in the department's next budget.                                                                           
REPRESENTATIVE KREISS-TOMKINS commented  that, with Mr. Sniffen's                                                               
background, he  likes the direction  the Department of  Law (DOL)                                                               
has been  going in  terms of  becoming more  self-sufficient, and                                                               
also, with  this legal  work it  makes a lot  of sense  given the                                                               
fairly  unsettled   direction  the  legislature  has   given  the                                                               
agencies over the last few years.   He asked Mr. Sniffen to speak                                                               
to  the amount  of  money  the department  had  spent on  outside                                                               
counsel for FERC work, how  the department's overall expenditures                                                               
on FERC work  has changed by moving from outside  counsel to more                                                               
of an  in house approach, and  how the department might  see that                                                               
trend continue to play out in the event this bill passes.                                                                       
MR. SNIFFEN replied that over the  last, at least, two years, the                                                               
department  reduced   its  reliance   on  outside   FERC  counsel                                                               
significantly.  The department's budget  for FY18 is $375,000 and                                                               
previously it was over $1 million.   He noted that [the reliance]                                                               
depends on whether  the department, for example,  was involved in                                                               
a large piece  of litigation, and he pointed  to the department's                                                               
"strategic  reconfiguration  thing"  that  legislators  may  have                                                               
heard about.   He explained  that a  lot of effort  was involved,                                                               
the department  recovered just  over $200  million for  the state                                                               
largely due  to its  outside counsel.   He acknowledged  that the                                                               
department still needs  the outside counsel, but it  is trying to                                                               
bring it  in house, with  himself and one other  attorney dealing                                                               
with these  issues and  learning "this stuff"  to build  in house                                                               
expertise and rely  less and less on outside  counsel.  Although,                                                               
he  pointed out,  it is  difficult when  the outside  counsel has                                                               
been doing this work  for the state for 30 years  and has much in                                                               
house  knowledge  and historical  information  from  doing it  so                                                               
long, and the  department relies on that  historical knowledge in                                                               
moving forward.  Currently, he  advised, the department is trying                                                               
to use that  outside counsel in more of an  advisory role to help                                                               
the department navigate  the complicated FERC issues,  and in the                                                               
future the advisory role will, hopefully, be less and less.                                                                     
1:50:13 PM                                                                                                                    
CHAIR  CLAMAN  pointed  out  that  under  the  current  scenario,                                                               
because  the  legislature  hasn't   given  the  attorney  general                                                               
authority to participate in FERC  matters, currently, in order to                                                               
participate in  a FERC matter, the  department, essentially, must                                                               
hire  outside  counsel.    The  department  must  then  obtain  a                                                               
separate appropriation or put it  in the budget somewhere to give                                                               
the department funds, on top of the .17 percent, he said.                                                                       
MR. SNIFFEN  agreed, and  he explained  that the  department uses                                                               
general  fund money  for its  FERC  work currently.   Having  the                                                               
ability  to pass  some of  this cost  on to  the regulatory  cost                                                               
charge  will probably  not eliminate  the need  for that  general                                                               
fund money, but it will somewhat offset some of those costs.                                                                    
CHAIR CLAMAN  surmised that what  is essentially  happening today                                                               
is that  the .17  percent, without the  statutory change,  is all                                                               
used in RCA matters.                                                                                                            
MR. SNIFFEN answered in the affirmative.                                                                                        
CHAIR  CLAMAN  continued  that if  the  legislature  passes  this                                                               
legislation, it essentially means that  from that .17 percent, in                                                               
just picking a number out of a hat,  if .07 was used for FERC and                                                               
.10 was being used for RCA,  what would happen is that the people                                                               
regulated in RCA would pay a  little less, and those regulated in                                                               
FERC would pay a little more, but the .17 remains the same.                                                                     
MR. SNIFFEN answered in the affirmative.                                                                                        
1:51:45 PM                                                                                                                    
REPRESENTATIVE REINBOLD  asked for verification that  Tessoro and                                                               
Petro Star  are the  two main businesses  that will  be impacted,                                                               
and that Mr. Sniffen does not see any impact to anyone else.                                                                    
MR. SNIFFEN  noted that  there may  be some  impact on  some Cook                                                               
Inlet pipeline  operators, such as  Hilcorp Energy to  the extent                                                               
they are also  purchasing oil or gas from one  of those folks for                                                               
their operation.   Other than  that, he said  that Representative                                                               
Reinbold was correct.                                                                                                           
1:52:59 PM                                                                                                                    
REPRESENTATIVE  REINBOLD  said  the  three  main  businesses  are                                                               
Hilcorp Energy,  Tessoro, and Petro  Star, and  acknowledged that                                                               
she doesn't  understand anything that  is going on with  FERC and                                                               
TAPS right  now.   She asked  whether there  is something  in the                                                               
works right  now, and whether  he was anticipating some  need for                                                               
the attorney general to get involved with FERC right now.                                                                       
MR. SNIFFEN explained  that currently the state  is in litigation                                                               
involving tariff  rates on TAPS  for the years 2011-2015,  and is                                                               
in  a settlement  posture  currently.   Depending  upon how  that                                                               
goes, if  the department ends up  in litigation on that  case, it                                                               
will  require  a   lot  of  resources  to   litigate  that  case.                                                               
Although, the end result of that  case could mean $500 million to                                                               
the  state, plus  or minus.   Therefore,  he pointed  out, it  is                                                               
important  that   the  department   deal  with   that  litigation                                                               
REPRESENTATIVE REINBOLD  asked the  name of the  parties involved                                                               
in the lawsuit.                                                                                                                 
MR.  SNIFFEN answered  that joint  parties are  involved in  this                                                               
case,  it  is  the  state,  FERC trial  staff,  and  Tessoro  and                                                               
Anadarko Petroleum.  The state  is challenging the rates filed by                                                               
the  carriers  for  the  TAPS tariffs  for  years  2011-2015,  he                                                               
MR.  SNIFFEN, in  response to  Representative Reinbold,  answered                                                               
that  the  carriers  are ExxonMobil  Corporation,  ConocoPhillips                                                               
Alaska, Inc., and British Petroleum.                                                                                            
REPRESENTATIVE  REINBOLD asked  whether those  companies will  be                                                               
impacted by this.                                                                                                               
MR. SNIFFEN reiterated, "No."                                                                                                   
REPRESENTATIVE  REINBOLD  asked   for  verification  that  solely                                                               
Hilcorp  Energy, Tessoro,  and Petro  Star are  impacted by  this                                                               
MR. SNIFFEN  agreed, and  said it would  be "the  intrastate, the                                                               
instate folks who actually operate pipelines in the state."                                                                     
1:54:57 PM                                                                                                                    
REPRESENTATIVE REINBOLD asked whether  Mr. Sniffen was asking for                                                               
a  law  change  because  the department  needs  something  for  a                                                               
lawsuit [involving  tariffs from] 2011-2015, some  sort of tariff                                                               
MR.  SNIFFEN said  no,  this law  probably  wouldn't impact  that                                                               
much, to the extent the department  can use some of the RCC funds                                                               
to pay  for a  little bit of  that work, but  that work  will far                                                               
exceed  any  money the  department  might  receive from  shifting                                                               
money around in this regulatory cost charge.                                                                                    
REPRESENTATIVE  REINBOLD reiterated  her  previous questions  and                                                               
asked whether there is any  other reason "why now" the department                                                               
wants the  attorney general  to work with  the FERC,  and whether                                                               
RCA and FERC is supporting it.                                                                                                  
MR. SNIFFEN answered  that the department approached  the RCA and                                                               
it  did not  express any  opposition,  it did  not approach  FERC                                                               
because it doesn't have a role in this.                                                                                         
1:56:30 PM                                                                                                                    
REPRESENTATIVE REINBOLD asked whether  there is anything else Mr.                                                               
Sniffen is anticipating  going before the FERC  that requires the                                                               
attorney general to be involved.                                                                                                
MR.  SNIFFEN  responded that  the  department  will have  ongoing                                                               
matters  with FERC  on the  TAPS pipeline  until the  pipeline is                                                               
finished,  and those  matters vary  year-to-year.   He  explained                                                               
that it is  largely driven by what the carriers  decide they want                                                               
to do, for  example, when the carriers want to  raise their rates                                                               
they  have  to make  a  filing,  the  department reviews  it  and                                                               
decides  whether  those  rates  are  just  and  reasonable.    He                                                               
explained that  those rates directly impact  production taxes and                                                               
royalties the producers pay to  the State of Alaska because those                                                               
transportation costs  are deducted when determining  value at the                                                               
wellhead.  He clarified that,  currently, the state has a lawsuit                                                               
against these  carriers for  these TAPS rates  before FERC.   The                                                               
carriers filed their  rates, the department is  reviewing them to                                                               
determine whether the  rates are [just and reasonable].   He said                                                               
he does not want to leave  the impression that the department has                                                               
litigation  out  there  against  them,  and  explained  that  the                                                               
department  has had  this administrative  process going  on which                                                               
could become a lawsuit, but that is currently not happening.                                                                    
1:58:01 PM                                                                                                                    
MR. SNIFFEN,  in response to Representative  Eastman, agreed that                                                               
the .003 amount is not expected  to get to the full amount needed                                                               
to participate in the proceedings.                                                                                              
REPRESENTATIVE EASTMAN asked  the value of the .17,  and how much                                                               
higher would  it need to go  to get the department  to the amount                                                               
needed.  He  offered that he recognizes,  from previous hearings,                                                               
that the department  is under financial constraints,  and if this                                                               
is an  important issue he  would not want  to see these  types of                                                               
proceedings competing unnecessarily  against prosecuting cases in                                                               
the criminal division, for example.                                                                                             
MR.  SNIFFEN responded  that  the  .17 percent  is  a percent  of                                                               
another  number,  it's  the gross  operating  revenues  of  these                                                               
pipelines  and utilities,  which  varies from  year-to-year.   He                                                               
opined that last  year it was roughly $2.1 million,  and there is                                                               
an amount  under that which  pays for  the work performed  at the                                                               
attorney general's  office to represent the  public's interest in                                                               
these  proceedings, and  that will  not change.   The  department                                                               
would use  a small  amount for the  department's work  related to                                                               
pipeline work,  for example, but  that is mostly work  before the                                                               
RCA on utility matters and not  pipeline matters.  As to how much                                                               
money is needed  down the road to continue looking  at these TAPS                                                               
tariff  cases,  he said  he  does  not  have  that answer.    The                                                               
department's  budget  now has  attorneys  devoted  to working  on                                                               
these matters, and  maybe one or less attorneys to  do FERC work.                                                               
He related that the department  will rely on its outside counsel,                                                               
as it  has in the  past, and hopes  to wean  off a bit  in moving                                                               
forward.  It just  depends on the type of cases  that come up, in                                                               
the event  complicated big pieces  of litigation come up,  and it                                                               
has to  start hiring experts, for  example, it may cost  a little                                                               
2:00:29 PM                                                                                                                    
REPRESENTATIVE EASTMAN noted  that last year the  amount was $2.1                                                               
million, and  he asked  how much above  the .17  percentage point                                                               
the department  would have needed  in order to not  incur general                                                               
fund obligations.                                                                                                               
MR. SNIFFEN replied that he does  not have an answer and will see                                                               
if the department can get that information to him.                                                                              
CHAIR CLAMAN opened public testimony.   After ascertaining no one                                                               
wished to testify, closed public testimony on HB 120.                                                                           
2:01:30 PM                                                                                                                    
REPRESENTATIVE LEDOUX asked him to  explain the procedure used to                                                               
ensure  that the  word had  gotten  out to  the stakeholders  who                                                               
could be impacted by the bill.                                                                                                  
MR.   SNIFFEN   advised   that    the   department   spoke   with                                                               
representatives of  the utilities,  it approached  the Department                                                               
of Commerce, Community & Economic  Development and the Regulatory                                                               
Commission of Alaska (RCA) to offer  their input on the bill, and                                                               
their feedback indicated they did  not have concerns with HB 120.                                                               
He offered  that he heard  from representative of  Hilcorp Energy                                                               
who didn't  express any opposition  to it  at that time,  and the                                                               
department  has  not  heard  from  any  of  the  other  potential                                                               
2:02:33 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked Mr. Sniffen to  explain exactly what                                                               
the department has  done to make sure they are  at least aware of                                                               
this bill.                                                                                                                      
MR.   SNIFFEN  answered   that  the   department  contacted   the                                                               
stakeholders  through informal  communications, and  advised that                                                               
Robin Brena, representative of Tessoro,  is aware of the bill and                                                               
hasn't  expressed  any  concern  to Mr.  Sniffen.    Mr.  Sniffen                                                               
related  that the  department couldn't  think of  any others  who                                                               
would have  an interest in  this bill  that are not  already very                                                               
aware of the legislation and its impact.                                                                                        
REPRESENTATIVE  REINBOLD  related that  it  is  important to  get                                                               
these  people before  the committee,  because any  time the  bill                                                               
impacts the other side it is good to hear their thoughts.                                                                       
[HB 120 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB120 ver. A 3.1.17.PDF HJUD 3/6/2017 1:00:00 PM
HJUD 3/20/2017 1:00:00 PM
HB 120
HB120 Transmittal Letter 3.2.17.pdf HJUD 3/6/2017 1:00:00 PM
HJUD 3/20/2017 1:00:00 PM
HB 120
HB120 Summary of Bill 3.2.17.pdf HJUD 3/6/2017 1:00:00 PM
HJUD 3/20/2017 1:00:00 PM
HB 120
HB120 Fiscal Note LAW-CIV 2.24.17.pdf HJUD 3/6/2017 1:00:00 PM
HJUD 3/20/2017 1:00:00 PM
HB 120
HB020 Draft Proposed CS ver. J 3.1.17.pdf HJUD 3/6/2017 1:00:00 PM
HB020 Amendments 1-12 3.3.17.pdf HJUD 3/6/2017 1:00:00 PM
HB020 Amendment 1 replacement 3.3.17.pdf HJUD 3/6/2017 1:00:00 PM