Legislature(2001 - 2002)

04/02/2001 10:17 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 83 - NATURAL GAS RESOURCES DEVELOPMENT                                                                                     
                                                                                                                                
[Contains references to SB 164.]                                                                                                
                                                                                                                                
Number 0270                                                                                                                     
                                                                                                                                
CHAIR OGAN  announced that  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 has "morphed" into  a companion bill                                                               
to [SB 164].                                                                                                                    
                                                                                                                                
Number 0270                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE moved to adopt  CSHB 83, Version 22-LS0322\L,                                                               
Chenoweth,   3/28/01,  as   the  working   document  before   the                                                               
committee.   There being no  objection, Version L was  before the                                                               
committee.                                                                                                                      
                                                                                                                                
Number 0306                                                                                                                     
                                                                                                                                
SENATOR JOHN  TORGERSON, Alaska  State Legislature,  testified as                                                               
sponsor of  SB 164 [the companion  to HB 83].   Senator Torgerson                                                               
explained that  upon review of the  bill [HB 83], he  saw that it                                                               
contained  two sections  [not included  in SB  164] one  of which                                                               
included  local  hire provisions,  which  he  felt fit  into  the                                                               
context  of  the bill.    The  other  section, which  he  doesn't                                                               
believe fits with  the intent of the bill, is  located on page 3,                                                               
subparagraph (b).  Although he  believes that the [state] may end                                                               
up requesting  that the  line have  excess capacity,  he believes                                                               
that the state would have to pay for it.                                                                                        
                                                                                                                                
SENATOR TORGERSON, in response to  Chair Ogan, explained that [SB
164] amends the  declaration of legislative policy  that is found                                                               
in statute dealing with the  right-of-way leasing provisions.  It                                                               
merely  adds four  or five  other components  to the  legislative                                                               
policy declaration.   He pointed  out that  Alaska's constitution                                                               
"directs  the legislature  to provide  for  the utilization,  the                                                               
development, the  conservation of  all our natural  resources for                                                               
the  maximum benefit  of its  people."   This language  wasn't in                                                               
statute in  that particular location  before.   Senator Torgerson                                                               
pointed  out that  the  language  being discussed  is  on page  1                                                               
though page 2.                                                                                                                  
                                                                                                                                
SENATOR TORGERSON turned to the top  of page 2, lines 3-12, which                                                               
addresses  in-state uses.   On  page 2,  [subparagraph] (B)  is a                                                               
conforming amendment  so that sub-subparagraph (i),  which is the                                                               
language   addressing   the   maximum  benefit   for   short-term                                                               
construction and operation, can  be included.  [Sub-subparagraph]                                                               
(ii)  is   also  a  conforming  amendment.     Senator  Torgerson                                                               
explained  that subparagraph  (C)  makes the  statement that  the                                                               
line must add long-term property value  to the tax base for local                                                               
state  governments.   [Paragraph] (2)  ensures "that  the design,                                                               
location,   and  construction   of   a   pipeline"  enhance   the                                                               
opportunities  listed on  page 3,  [subparagraph's] (A)  and (B).                                                               
He  reiterated  that  page  3,   subparagraph  (B)  doesn't  fit.                                                               
Senator Torgerson  continued with  page 3, subsection  (b), which                                                               
is the "real meat and potatoes."                                                                                                
                                                                                                                                
Number 0760                                                                                                                     
                                                                                                                                
CHAIR  OGAN  asked   if  this  is  similar  to   the  policy  the                                                               
legislature set out with Northstar.                                                                                             
                                                                                                                                
SENATOR TORGERSON  pointed out that  in the past  the legislature                                                               
has  made legislative  policy and  then made  a legislative  best                                                               
interest  findings,  which was  done  with  Northstar.   Although                                                               
Northstar  was  challenged,  its  constitutionality  was  upheld.                                                               
There was a  similar situation with the  Kachemak Bay prohibition                                                               
against leasing  oil and  gas [strictly in  Kachemak Bay].   Both                                                               
cases determined that the legislature  does have the authority to                                                               
set policy and  direct the commissioner to follow  the policy set                                                               
by the legislature.                                                                                                             
                                                                                                                                
CHAIR OGAN surmised then that  the legislature isn't treading new                                                               
ground because there have been  legislative findings in the past.                                                               
He  asked if  Senator Torgerson  felt that  [HB 83]  is the  same                                                               
model as in Northstar and Kachemak Bay.                                                                                         
                                                                                                                                
SENATOR TORGERSON replied  yes.  However, he  noted that although                                                               
this  hasn't  been done  in  relation  to pipelines,  legislative                                                               
policy and  findings have  been done in  other cases  relating to                                                               
natural resources.                                                                                                              
                                                                                                                                
CHAIR  OGAN  related  his  understanding  that  [HB  83]  doesn't                                                               
preclude them  from building  a northern  route, it  merely would                                                               
have to be built after the southern route.                                                                                      
                                                                                                                                
SENATOR TORGERSON agreed with Chair Ogan's understanding.                                                                       
                                                                                                                                
Number 0917                                                                                                                     
                                                                                                                                
CHAIR  OGAN said  that he  believes that  another bill  will come                                                               
over  from the  Senate.   He noted  that the  labor language  was                                                               
borrowed from  the Northstar  agreement.  He  said he  would take                                                               
out the  capacity language,  which he  felt was  more appropriate                                                               
for the  hub discussion  that this committee  intends to  work on                                                               
over the interim.                                                                                                               
                                                                                                                                
SENATOR  TORGERSON  agreed  with  Chair Ogan  that  the  capacity                                                               
language  belongs  in  the  southern  route  or  hub  discussion.                                                               
Senator  Torgerson   noted  that   there  is  another   piece  of                                                               
legislation that will ask the  Department of Revenue to perform a                                                               
study on  owner equity  on all  or part  of the  line as  well as                                                               
address other questions.                                                                                                        
                                                                                                                                
CHAIR  OGAN announced  that pending  referral  of SB  158 to  the                                                               
House Special  Committee on Oil and  Gas, it will be  noticed for                                                               
next  week  and   expedited  as  quickly  as   possible.    After                                                               
determining  there were  no questions  for  Senator Torgerson  or                                                               
Larry Persily, Department  of Revenue, he asked if it  would be a                                                               
fair assumption that both options  will be reviewed by the [North                                                               
American Natural Gas Pipeline Group].                                                                                           
                                                                                                                                
Number 1180                                                                                                                     
                                                                                                                                
MICHAEL HURLEY, Government Relations,  North American Natural Gas                                                               
Pipeline Group  (NANGPG), answered  that that the  group believes                                                               
that it  is prudent  business to continue  to review  the routes.                                                               
Under   the   Federal   Energy   Regulatory   Commission   (FERC)                                                               
application  standards for  a certificate  of public  convenience                                                               
and  necessity  there  are   requirements  that  alternatives  be                                                               
reviewed.  He remarked that  a discussion probably needs to occur                                                               
with  FERC in  order to  determine what  alternatives need  to be                                                               
reviewed.   The alternatives  that had  been identified  were the                                                               
northern route.   However, there  is legislation that  makes that                                                               
route problematic.                                                                                                              
                                                                                                                                
CHAIR  OGAN posed  a situation  in  which the  southern route  is                                                               
built.   In such  a case,  would it  be cost  effective to  run a                                                               
pipeline  from  MacKenzie  to  Point  Thompson  or  wherever  the                                                               
infrastructure is and pipe the gas east or west.                                                                                
                                                                                                                                
MR. HURLEY  said that  he expected that  should NANGPG  build the                                                               
southern  route, the  MacKenzie producers  would build  their own                                                               
route south  up the MacKenzie Valley.   He noted that  there is a                                                               
consortium of MacKenzie Valley producers  who are reviewing such,                                                               
almost independent of  what NANGPG does.  In  further response to                                                               
Chair  Ogan, Mr.  Hurley related  his belief  that the  MacKenzie                                                               
producers  includes Exxon,  through  its  Imperial subsidiary  in                                                               
Canada, Gulf  Canada, and  several of  the pipeline  companies in                                                               
Canada have been or may be  involved at this point.  However, Mr.                                                               
Hurley wasn't sure who was doing  the work now.  He recalled that                                                               
one of the original sponsors had been Shell.                                                                                    
                                                                                                                                
CHAIR OGAN  inquired as to whether  Exxon is the major  holder of                                                               
the gas.                                                                                                                        
                                                                                                                                
MR. HURLEY  answered that he  wasn't sure, although he  knew that                                                               
Exxon held a significant position.                                                                                              
                                                                                                                                
CHAIR OGAN expressed interest in  obtaining a breakdown in regard                                                               
to who owns what percentage of gas.                                                                                             
                                                                                                                                
MR. HURLEY  noted that  he has  seen a  report from  the Canadian                                                               
government that he could provide to the chair.                                                                                  
                                                                                                                                
Number 1389                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS pointed  out  that  currently it's  against                                                               
federal  law to  go north.   If  HB 83  passes, then  it will  be                                                               
against  state  law to  provide  leases  on the  northern  route.                                                               
Therefore,  she inquired  as to  whether FERC  could charge  that                                                               
[NANGPG] has  looked at the north  even though it is  illegal and                                                               
thus  [NANGPG] will  have  to look  north in  order  to obtain  a                                                               
certificate  for the  south.   Also, she  inquired as  to whether                                                               
FERC,  as a  regulatory commission,  would force  the study  of a                                                               
route  that is  against  federal  law and  state  law,  if HB  83                                                               
passes.                                                                                                                         
                                                                                                                                
MR.  HURLEY answered,  "We're  not  sure.   We  haven't had  that                                                               
discussion  with them."   He  echoed his  earlier testimony  that                                                               
[NANGPG] isn't  sure what alternative  FERC would want to  see if                                                               
it didn't want to see [the northern route].                                                                                     
                                                                                                                                
REPRESENTATIVE GUESS  reiterated that [the northern  route] would                                                               
be against federal law.                                                                                                         
                                                                                                                                
MR. HURLEY said,  "Given that you would be  making it potentially                                                               
illegal under state  law, FERC has, to the best  of my knowledge,                                                               
not determined that its against federal law to go north."                                                                       
                                                                                                                                
REPRESENTATIVE GUESS said,  "So, we did that  in the presidential                                                               
decision in the Natural Gas [Act]."                                                                                             
                                                                                                                                
MR. MURPHY  remarked that this  is one  of the areas  that NANGPG                                                               
needs to  work on this year.   There have been  several different                                                               
legal opinions  that say  several different things.   This  is an                                                               
area in  which NANGPG is  unclear in  regard to the  true federal                                                               
requirements.                                                                                                                   
                                                                                                                                
Number 1510                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUESS remarked  that this  seems to  be a  fairly                                                               
important  question   to  ask  because  FERC's   role  should  be                                                               
understood.  If FERC says that  the northern route is against the                                                               
presidential decision and the Natural  Gas Act and state, then it                                                               
may shift NANGPG's  focus to what is in the  best interest of the                                                               
company.   Since  two  members have  been  appointed, has  NANGPG                                                               
decided to move forward and ask the aforementioned question?                                                                    
                                                                                                                                
MR. HURLEY answered  that the federal government  will be heavily                                                               
involved in all  of these discussions.   Furthermore, NANGPG will                                                               
speak with  the federal  government and FERC  in regard  to their                                                               
view of how this is to work.                                                                                                    
                                                                                                                                
REPRESENTATIVE GUESS  asked whether the process  to approach FERC                                                               
in order  to understand their  role in choosing  a representative                                                               
has been started.                                                                                                               
                                                                                                                                
MR.  HURLEY replied  that there  have been  discussions with  the                                                               
federal agencies,  including FERC.   As one would  imagine, there                                                               
is a  bit of a "turf  battle" in regard  to who will be  the lead                                                               
agency in  the federal  government.  He  noted that  this process                                                               
will obviously be revised.                                                                                                      
                                                                                                                                
Number 1649                                                                                                                     
                                                                                                                                
CHAIR  OGAN inquired  as to  what  Mr. Hurley  thought about  the                                                               
provisions in  CSHB 83 regarding labor.   He also inquired  as to                                                               
whether  any of  the companies  Mr. Hurley  represents will  have                                                               
problems with that.                                                                                                             
                                                                                                                                
MR. HURLEY responded,  "In our view of how this  project is going                                                               
to roll  out, we're going to  be hiring not only  every qualified                                                               
Alaskan, but every  qualified North American to try  and get this                                                               
thing  built."   In further  response to  Chair Ogan,  Mr. Hurley                                                               
expressed his hope that Alaskans would be hired first.                                                                          
                                                                                                                                
CHAIR  OGAN  urged  Mr.  Hurley  to convey  the  desire  to  hire                                                               
Alaskans first if this project moves forward.                                                                                   
                                                                                                                                
MR. HURLEY noted  that discussions within NANGPG  have begun with                                                               
entities  involved in  training and  jobs programs.   Mr.  Hurley                                                               
said that  [NANGPG] understands  the need and  the desire  of the                                                               
legislature and the people of Alaska  to have as much local labor                                                               
as possible.                                                                                                                    
                                                                                                                                
Number 1815                                                                                                                     
                                                                                                                                
CHAIR  OGAN  asked  if  there  have  been  discussions  with  the                                                               
University  of  Alaska  regarding  meeting the  needs  of  future                                                               
employees.                                                                                                                      
                                                                                                                                
MR. HURLEY related his understanding  that the university is part                                                               
of the "APEC"  (ph) group.  He noted that  [NANGPG] has a meeting                                                               
with them shortly.                                                                                                              
                                                                                                                                
CHAIR  OGAN related  his  belief that  the  University of  Alaska                                                               
should be  the premier oil and  gas university in the  nation and                                                               
should turn out not only the  disciplines in oil and gas but also                                                               
the trade people.  "The  University of Alaska should be dedicated                                                               
to oil and gas research," he charged.                                                                                           
                                                                                                                                
CHAIR OGAN  asked if anyone  else would  like to testify.   There                                                               
was no one else to testify.  [HB 83 was held over.]                                                                             

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