Legislature(2001 - 2002)
04/10/2001 05:30 PM House O&G
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
SB 143 - RIGHT-OF-WAY LEASING ACT:APPLICATION COST Number 1890 VICE CHAIR FATE announced the final order of business, SENATE BILL NO. 143, "An Act authorizing the Department of Natural Resources to enter into agreements with a person or persons desiring to own an oil or natural gas pipeline proposed to be located on state land for the purposes of providing for payment of the reasonable costs incurred in preparing for activities before receipt of an application under the Alaska Right-of- Way Leasing Act and for activities relating to the processing of an application under that Act; and providing for an effective date." Number 1930 SENATOR JOHN TORGERSON, Alaska State Legislature, came forward as the chairman of the Senate Resources Standing Committee, sponsor of SB 143. He explained that under current Alaska law, the state cannot start charging for applications costs on right- of-way leasing for pipelines until after an application is actually filed. Therefore, SB 143 says the department can enter into a memorandum of understanding with pipeline owners or producers during the preapplication period, for example, to put a pipeline in and then collect the costs of the assessments until the application is filed. SENATOR TORGERSON informed members that this is in response to the $10 million fiscal note from the governor's office for pipeline work that [the governor] wants to do this next year. He characterized it as a "pay-as-you-go" bill, noting that its sunset date of December 31, 2003, could be extended easily, if so desired; he cautioned, however, against having these pipeline agreements come before [the legislature] "forever." Number 2050 WILLIAM G. BRITT, JR., Pipeline Coordinator, Office of the Commissioner, Department of Natural Resources (DNR), testified via teleconference, explaining that the DNR fairly routinely enters into agreements for reimbursement of preapplication costs. He noted that he is in the process of working with both the producers and Foothills [Pipe Lines Ltd.] to craft such agreements for the gas pipeline. Acknowledging that there is some disagreement over whether the DNR has existing authority to do so, he said clarifying the existence of that authority is certainly beneficial. MR. BRITT expressed concern, however, that the sunset clause in Section 2 has the potential of precluding [the DNR] from doing what it has routinely done, and what appears to be good policy for the state, after December 31, 2003. He agreed with Senator Torgerson that [the sunset date] is not difficult to undo, but said the existing standard operating procedure within the DNR's Pipeline Coordinator's office of seeking reimbursement prior to an application - as well as the rest of the bill, which indicates the DNR has the ability to do so - appears to be good public policy that should not expire on that date. Number 2141 REPRESENTATIVE OGAN responded, saying it seems the idea of the sunset date is to set a timeline for this particular proposed project to come to fruition. He brought attention to the large amount of gas available in the Lower 48. He said perhaps having a deadline expresses the legislature's intent to expedite [the pipeline]; the longer [Alaska] waits, the more gas wells will be drilled [elsewhere] and the less likely it is that the project will be built. REPRESENTATIVE OGAN also suggested the same argument could be used regarding this project that has been used about an LNG [liquefied natural gas] project, since this [proposed gas] pipeline would be more than 2,000 miles long, into a market that already has a lot of gas that is closer and cheaper to develop. He said time is of the essence, which is the message that he believes the sunset date sends. SENATOR TORGERSON replied that it is part of it; he believes, however, that if the department is charging people for preapplication costs, it is currently against the law. He noted that Foothills [Pipe Lines Ltd.] has an application in, even if it is an old one. He stated: I know [they] entered into an agreement with Alyeska on renewal of that pipeline, but you could argue that there's been enough correspondence, although not necessarily an application in writing, ... to certainly say that that was the intent, to go forward with that .... I think we all know they're not going to pick that pipeline up and leave in three years when their renewal is up. But the law clearly states that you cannot start charging until ... an application is filed. ... I'm not here to pick on what they have done in the past, but as far as the gas line is concerned, ... and the amount of money that's being asked for us to spend upfront on this gas line, I believe the producers should pay for it. Anything that's reimbursable ... within regular business terms that we have done in the past, they should pony up the money as they go along. And that's what the intent of this bill is. And in any event, a lot of this stuff is after the application is filed; there's a "look-back" period where you can ... charge the money that you've already spent on a preapplication, but it'd only be on one route. Now, we can all assume that we have one route, but we also know there's looking at other routes; and I certainly hope that they don't pick one in particular, but there are ... other routes that they're looking at, ... and I don't know if we're going to spend the money on it or not. But, in any event, if we do, we ought to get paid back, or paid in advance, and this bill calls for that. VICE CHAIR FATE thanked Senator Torgerson and asked whether there was further testimony; none was offered. Number 2359 REPRESENTATIVE JOULE made a motion to move SB 143 out of committee with individual recommendations and attached fiscal notes. There being no objection, SB 143 was moved out of the House Special Committee on Oil and Gas.
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