Legislature(2001 - 2002)
01/30/2001 10:02 AM House O&G
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 83 - NATURAL GAS RESOURCES DEVELOPMENT [Contains testimony relating to HB 9] Number 1832 CHAIR OGAN announced the next order of business would be HOUSE BILL NO. 83, "An Act relating to natural gas pipelines, providing a statutory definition for the portion of the constitutional statement of policy on resource development as applicable to the development and transportation of the state's natural gas reserves, amending Acts relating to construction of natural gas pipelines to require conformance to the requirements of the statutory definition, and amending the standards applicable to determining whether a proposed new investment constitutes a qualified project for purposes of the Alaska Stranded Gas Development Act; and providing for an effective date." CHAIR OGAN noted that HB 83 was sponsored by the House Special Committee on Oil and Gas. He informed members that he didn't intend to move the legislation from committee anytime soon. Instead, he wished to get the issue before the public and have a thorough discussion before moving any legislation relating to the gas pipeline. CHAIR OGAN explained that HB 83 interprets Article VIII, Sections 1 and 2, of the Constitution of the State of Alaska. Section 1 of the constitution reads: It is the policy of the State to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest. Section 2, the general authority section, reads: The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people. CHAIR OGAN informed members that Section 1 of HB 83 articulates those sections of the constitution. It provides a development strategy and some policy guidance for the administration, to ensure that the transportation of natural gas is designed and located to be responsive to those requirements, by talking about both short- and long-term job opportunities in the state. CHAIR OGAN pointed out that subparagraph (C) [page 2, beginning at line 22] talks about significant long-term property value to the tax base and other things to provide for local government support. Under paragraph (2) [page 2, beginning at line 26], it says that the gas pipeline from the state to North American markets does not foreclose any other options. This is to keep the options open, not only for a pipeline route but also possibly for an LNG [liquefied natural gas] line to Valdez or Anchorage. CHAIR OGAN referred to testimony at another meeting about the availability of natural gas reserves in Anchorage; he said the known reserves are estimated to last about 12 years. Despite optimism that there is more gas out there, nobody has really drilled for it yet or found it. "And 90 percent of those gas reserves were found in the 1960s," he added. CHAIR OGAN said the bill addresses environmental concerns. However, it also says the commissioner shall issue a written finding that this project will comply with the overall strategy for development, use, and control of the project or projects to develop and transport the state's natural gas resources. In a nutshell, this says that the gas pipeline must be developed for the maximum benefit of the people. He asked: What does that mean? Does it mean a northern route and simply generating revenues? Or a southern or Alaskan Highway route by which Alaskans can not only get the jobs to build it, but also get access to the gas to enhance lifestyles and keep low-cost energy for Alaskans? Chair Ogan indicated his own interpretation of maximum use would be the latter. Number 2143 LARRY PERSILY, Deputy Commissioner, Department of Revenue, came forward to testify on both HB 83 and HB 9. He noted that when the Alaska Stranded Gas Development Act (HB 393) was passed three years ago, a section in that bill set a deadline for applications under the law: June 30, 2001. The two bills before the committee [HB 83 and HB 9] would not change that deadline. He pointed out that the governor's legislation [HB 38] suggests extending that deadline to December 2001, which may be something the committee might want to consider. Mr. Persily added that he doesn't think anyone realistically expects a project application by June. He offered to give input as to what an appropriate deadline would be. [Tony Braden and Jim Cowan of the Department of Natural Resources informed the chair via teleconference that they were available to answer questions.] Number 2291 MARK MYERS, Director, Division of Oil & Gas, Department of Natural Resources (DNR), testified via teleconference regarding the technical analysis. In terms of the commissioner's findings, he said a couple of things would be of interest. First, the division believes a study should be done in Cook Inlet to determine the demand for gas in the future; that relates to the development strategy and requirements under subparagraph (A) [page 2] of the bill. MR. MYERS discussed the second issue: placement of a pipeline. A route depends on alternate gas fields that might be found along that route. Therefore, the division believes additional work would be well warranted in terms of looking at the pipeline route and what additional resources might be available to put into the system later. CHAIR OGAN asked whether that was a capital request for the study in Cook Inlet. MR. MYERS said the division is submitting a fiscal note with that in there. It duplicates a capital request already in the governor's gas line CIP [capital improvement project]. CHAIR OGAN noted that a sectional analysis for HB 83 was being handed out to members [see memorandum from Jack Chenoweth dated January 22, 2001]. Number 2379 REPRESENTATIVE GUESS asked whether there was a positive fiscal note because of those two things that the division wants to do. MR. MYERS answered that in looking at the commissioner's finding, [the commissioner] is required to determine that there is, under this bill, sufficient gas for a low-cost domestic and industrial source; that is the demand side. The second part is the routing. That issue is directly involved with the language in the bill, but is also generic to the pipeline routes in other gas bills, which is why the governor's CIP gas line (indisc.). Number 2424 CHAIR OGAN asked Mr. Myers what the governor's position is on this bill. MR. MYERS responded that it wasn't appropriate for him to comment on that; he was there to provide technical support. He added, however, that he had heard that the governor is very supportive of a gas line. CHAIR OGAN asked Mr. Myers about the part of the legislation that would require enough capacity to be provided to whatever point where this [pipeline] might "Y" for either Valdez or Anchorage. He mentioned a recent newpaper article by Ken Thompson (ph) about a gas hub. MR. MYERS answered that the concept of a gas hub itself is a sound idea, but it depends on the implementation. There are many issues, including the best use of the state royalty oil, which he indicated were also mentioned in the article. He said: We're certainly not opposed to looking at the issues. But ... I think we actually have to have some proposals on the table by the producers as to ... how much gas they're selling, in what form they're all offering it for sale, et cetera. ... So, at this point, ... conceptually it sounds great. But how it would be implemented and the sources of all that gas, again, would be issues that ... we would need to work out .... I guess I'm basically being fairly vague until we have a little more on the markets and the supplies. MR. MYERS mentioned the "Alliance" meeting and discussion of gas demand. He said demand is a real part of it, as well as the costs of various versions and of producing the gas. The gas-to- liquids (GTL) process at this point is a lot less efficient internally than producing and shipping gas farther up the pipeline. One must compare the price for the GTL process versus a straight gas line. For numerous issues there aren't yet answers. Number 2560 REPRESENTATIVE CHENAULT asked Mr. Myers what he hopes to accomplish out of this $88,000 to study the demand for gas and the declining Cook Inlet reserves. MR. MYERS answered that it is basically to understand what the demand is and how much that demand can be met locally, within Cook Inlet. He deferred to Kevin Banks for details. Number 2591 KEVIN BANKS, Petroleum Market Analyst, Division of Oil & Gas, Department of Natural Resources, spoke via teleconference. He indicated the division proposed a study last summer to examine the market - specifically, the potential growth of demand - for gas in the Cook Inlet and Southcentral regions. On the supply side of this study has been considerable research by the producers in Cook Inlet. There doesn't seem to be a lot of dissention among those producers as to how much in potential reserves is now in place in Cook Inlet. MR. BANKS said there may be some issues relating to deliverability that the division would like to examine. On the other hand, the division doesn't have a very good handle yet on what kind of demand growth will be seen in Cook Inlet, which depends on the future price of gas; the division wants to look at that because it shows how the North Slope gas might fit into meeting that demand in another couple of decades. Number 2670 CHAIR OGAN asked whether there were further questions or additional testifiers; there was no response. He announced that HB 83 would be held for further consideration.
| Document Name | Date/Time | Subjects |
|---|