Legislature(2009 - 2010)BARNES 124
03/08/2010 06:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB369 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 369 | TELECONFERENCED | |
HB 369-IN-STATE PIPELINE/ MANAGER/TEAM
CO-CHAIR NEUMAN announced that the only order of business is
HOUSE BILL NO. 369, "An Act relating to an in-state natural gas
pipeline, the office of in-state gasline project manager, the
Joint In-State Gasline Development Team, and the In-State
Gasline Steering Committee; and providing for an effective
date."
6:27:33 PM
CO-CHAIR JOHNSON moved to adopt the proposed committee
substitute (CS) for HB 369, labeled 26-LS1527\E, Cook, 3/2/10,
("Version E"), as the working document.
CO-CHAIR NEUMAN objected for explanation purposes of the
differences between the original bill and Version E.
TOM WRIGHT, Staff, Representative Mike Chenault, Alaska State
Legislature, explained that Version E incorporates the
committee's amendments that have been adopted to date. The
partially exempt service for the in-state gasline project
manager was changed to exempt service, a change which was
requested by the administration. The words "the greatest number
of" were deleted from page 3, [line 19 of the original version],
so as not to pre-determine the route of the gasline. A
representative of the Denali Borough was added to the list of
steering committee members. Lastly, the language ", except for
requests from the Alaska Gasline Inducement Act coordinator ..."
was inserted on page 4, line 13 of the original version, after
the second "and".
6:29:54 PM
CO-CHAIR NEUMAN removed his objection to adopting Version E as
the working document. There being no further objection, Version
E was before the committee.
6:30:17 PM
CO-CHAIR JOHNSON moved to adopt Amendment 1, labeled 26-
LS1527\E.1, Cook, 3/8/10, written as follows [original
punctuation provided]:
Page 3, line 13:
Delete "by July 1, 2011, and take actions
necessary"
Page 3, line 14:
Delete "2015."
Insert "2016. The development team shall make a
commercial offering by July 1, 2011. The commercial
offering must consist of the issuance of a request for
proposals to potential in-state natural gas pipeline
project developers who will own the project or a
portion of it. The request for proposals must require
that commercial evaluations in the proposals be based
on engineering and permitting completed by the state
and its contractors and that proposals include
reimbursement for the cost incurred by the state of
data and interpretation of data. The request for
proposals must include notice that proposals will be
analyzed by the state, together with terms and
conditions for selection. The development team shall
report to the legislature on the date the commercial
offering is ready."
Page 3, line 30:
Delete "for construction of"
Insert "to meet construction deadlines for"
Page 4, line 6:
Delete "by July 1, 2011, and report to the
legislature by that date"
Insert "to enable natural gas to flow down the
pipeline by 2016"
REPRESENTATIVE KAWASAKI objected.
6:30:38 PM
CO-CHAIR NEUMAN requested Mr. Wright to explain Amendment 1.
MR. WRIGHT responded that Amendment 1 was forwarded at the
request of the administration. He deferred to Mr. Bob Swenson
for further explanation.
6:31:51 PM
ROBERT SWENSON, Project Manager, In-State Gas Project, Alaska
Mental Health Trust Land Office, Department of Natural
Resources, in response to Co-Chair Neuman, stated his title has
not changed since he took this position and he thinks his
position is similar to the one discussed in HB 369. In further
response, he said that in reference to HB 369 he assumes his
duties and authorities are the same as those for the proposed
project manager.
6:32:53 PM
MR. SWENSON, in additional response to Co-Chair Neuman,
explained that Amendment 1 talks specifically to ensuring
construction readiness by July 1, 2011. The fiscal note
presented to the committee last week relates in particular to
the engineering necessary to bring a project of this magnitude
to construction-readiness by that time frame beyond what is
currently going on in the project. This would include bringing
to fruition, as of July 1, 2011, the Class 4 cost estimates, the
permitting process from the right-of-way, and the Environmental
Impact Statement (EIS) process. He said the first two changes
proposed by Amendment 1 in regard to page 3, lines 13 and 14, of
Version E, would put the project on the current fast-track
timeline that the engineers in his project are already working
on and would bring the entire project into readiness for a
commercial offering as initiated last year by Mr. Harry Noah.
6:35:04 PM
CO-CHAIR NEUMAN inquired why not keep the ball rolling as fast
as possible and why take out the deadline of July 1, 2011.
MR. SWENSON replied the ball is already rolling on the project,
and the timeline is an accelerated, fast-track timeline to
ensure gas is flowing by 2016. In regard to removing the 2011
language, he said the ongoing engineering work will provide the
cost of transport analysis for a number of different options,
and will enable looking at the various options and
configurations of the pipeline so that the pipe can be ordered
once the engineering process is finalized. If a process is
started to meet that deadline of July 1, 2011, the initial
costing, options, and engineering will not have been done to
make that analysis.
6:36:19 PM
CO-CHAIR NEUMAN asked what was the original timeline proposed by
Mr. Noah.
MR. SWENSON answered he believes that on December 14, 2009, Mr.
Noah proposed a timeline of 2015, which at that time Mr. Noah
stated was a very aggressive timeline. At that time, [Mr.
Noah's team] felt the primary gas source would be the Gubik
field in the foothills of the Brooks Range, which has a very dry
methane gas similar to Cook Inlet gas that requires little
processing compared to Prudhoe Bay gas. However, the project
team has since moved to looking at gas from the Prudhoe Bay or
Point Thomson area. That gas requires a significant amount of
processing to remove the 12 percent carbon dioxide, as well as
the hydrogen sulfide and other impurities; this increases the
timeline for putting gas into a pipeline by one year to 2016.
6:37:39 PM
CO-CHAIR NEUMAN said several options are being looked at and all
of those options were considered when the date was put forth, so
he is therefore resistant to taking out the time-specific dates.
He inquired what would happen if the dates stayed in the bill.
MR. SWENSON responded that the 2015 and 2016 dates are goals.
He said it is important to understand the process necessary for
getting to the point of ordering pipe and determining the pipe
configuration. A number of aspects within the timeline are
beyond the team's control, such as the permitting process and
the availability of pipe and facilities. He requested the
engineers to provide him with three different timelines, he
related: a very aggressive fast-track timeline, a more
realistic timeline that considered the possibility of delays,
and a timeline of certainty. The timelines he was provided were
2016, 2017, and 2018 respectively. He added that Mr. Bill
Sparger (ph), an engineer with 40 years experience in pipeline
construction, is available online to answer questions in this
regard.
CO-CHAIR NEUMAN understood that missing a sea-lift for a gas
treatment facility at Prudhoe Bay could throw things off by a
year; another option is a gas treatment facility on the southern
end of the gas pipeline. The aggressive timelines are what he
likes best about this bill, he said.
6:41:23 PM
REPRESENTATIVE TUCK inquired why the Gubik gas field is no
longer considered an option.
MR. SWENSON replied that what he meant was during the initial
phase of this project the primary gas source was the Gubik
field. "Anadarko" has drilled wells in the Gubik field and is
in the process of analyzing them, so the Gubik reserves are
currently unknown. The project team has since changed the
primary target to the North Slope/Prudhoe Bay region, and while
the Gubik field is still an option, it is no longer the primary
option.
6:42:35 PM
REPRESENTATIVE TUCK surmised the reason why the North Slope has
become the priority is because an understanding of the Gubik gas
field is not as far as had been expected.
MR. SWENSON answered yes. He explained that in any large
project it is very important to have reserves and there is a
difference between reserves and resources. Resource just
indicates how much gas is thought to be there, while reserves
are actually booked with the number of well penetrations and
there is a very good technical understanding of the resource
that is available. A sequence of looking at reserves must be
undertaken to finance any large project like this. If the
reserves were actually booked in the Gubik field and were enough
to provide resource to this gas pipeline, then it would become a
very viable option in that process.
6:43:41 PM
REPRESENTATIVE TUCK asked how long it will take for the Gubik
field to become a reserve of known quantity.
MR. SWENSON responded that that is up to the level of drilling,
the developer of that field, and how many wells can be drilled
in a season. The Gubik field is in a very remote area by the
Colville River in the central North Slope area. Access,
permitting, and the number of wells that can be drilled in such
a remote area is therefore limited. The number of wells it
would take to actually delineate that resource is unknown, but
it would take a number of wells to do that. It is not years and
years away, but it is certainly a number of seasons away.
6:44:43 PM
REPRESENTATIVE KAWASAKI inquired as to the reason for deleting
"and take actions necessary" [from page 3, line 13].
MR. SWENSON replied that his project is currently in the first
phase of the engineering process, which is the engineering to
define the cost of transport. Getting to the point of
sanctioning a project and construction-readiness takes a
significant amount of additional engineering. It will take
another two to three years to use that initial cost of transport
in evaluations of the 16 different options, determine which
option makes the most sense, and then do the very detailed
engineering on that option. To be construction ready by July 1,
2011, would require stopping the current costing process and
immediately picking a specific option and moving forward on that
engineering. It is the detailed cost engineering that takes a
project to the point of sanction, he explained, and Mr. Sparger
could provide further details.
6:47:05 PM
REPRESENTATIVE KAWASAKI noted there are other sections within
Version E that say take any actions necessary for construction
to begin; for example, page 4, lines 5-6. He surmised that
these lines and others would also need to be amended in order to
follow the same line of logic.
MR. SWENSON answered correct.
CO-CHAIR NEUMAN reiterated that he is resistant to changing the
July 1, 2011, deadline.
6:48:10 PM
CO-CHAIR JOHNSON requested Mr. Swenson to address what a one-
year delay would cost in terms of time value of money.
MR. SWENSON responded he cannot address that from the standpoint
of time value of money, but he can address the efficiencies
afforded by that additional engineering work. Under his
project's current schedule, the costing for transport will be
done on the 16 different scenarios by July 2010. There are four
different pipeline configurations and a number of different
throughput scenarios from 250 million cubic feet per day on up
to 1 billion cubic feet per day. Those ongoing analyses will
provide an understanding of the options available, including the
types of gas found on the North Slope and Cook Inlet. Once a
specific configuration is chosen, the next phase of work will
take it through the optimization. A number of different
processes in that engineering effort help optimize what will
ultimately be built and sanctioned. At the end of that process
it will be known what type and schedule of pipe is needed and
what the metallurgy of that pipe needs to be, given the
permafrost and faulting along the route. From the standpoint of
cost savings in the overall project, the timeline that he is
laying out will optimize the long-term savings of the pipeline
as well as the construction cost savings.
6:50:49 PM
CO-CHAIR NEUMAN, in response to Representative Guttenberg,
requested that members stay focused on the first [of the four
changes] proposed by Amendment 1. He stated that the proposed
deletion on page 3, line 13, of Version E may not sound like
much, but it is much because it takes out a lot of teeth. He
reiterated his hesitation to do this.
CO-CHAIR JOHNSON said he shares Co-Chair Neuman's concern in
regard to a delay. He said he is unsure that the year delay
holds water because efficiencies will be gained when additional
expertise is brought into the planning. He asked whether
Amendment 1 is divisible.
CO-CHAIR NEUMAN responded that is why he wants to look at [each
of the four changes] individually. He remained unconvinced of
the necessity for deleting the July 1, 2011, deadline.
6:54:10 PM
REPRESENTATIVE GUTTENBERG noted that the development team would
be working with the steering committee, yet there is no mention
of when steering committee members would have to be appointed or
what constitutes a quorum for starting action. He said this
might need consideration later on.
CO-CHAIR NEUMAN agreed. He moved discussion to the second
change proposed by Amendment 1.
MR. SWENSON read aloud to the committee members the second
change proposed by Amendment 1.
6:56:54 PM
CO-CHAIR JOHNSON, in regard to the proposed second change,
inquired whether the language related to requests for proposals
fits within the procurement code. He further asked why this
language needs to be included.
MR. SWENSON replied the language is being provided to describe
what a commercial offering is for the pipeline. The procurement
code and the language associated with the procurement code would
have to be followed. In response to further questions from Co-
Chair Johnson, he said the language has not been vetted by
"legal" and it was not written by him or the administration; it
was suggestion to the sponsor. He said he helped Representative
Chenault's staff member to understand what a commercial offering
is in a pipeline bidding.
[Co-Chair Neuman passed the gavel to Co-Chair Johnson.]
6:59:49 PM
CO-CHAIR JOHNSON said he thinks the term commercial offering
should be defined and suggested that a definition be included at
the end of the bill.
MR. SWENSON allowed that that very well may be the case.
[Co-Chair Johnson returned the gavel to Co-Chair Neuman.]
7:00:54 PM
REPRESENTATIVE GUTTENBERG inquired why it is the development
team and not the project manager that is making the commercial
offering. He further asked if the language on lines 13-14 of
Amendment 1 directing the development team to report to the
legislature on the date the commercial offering is ready is
included in the amendment in case the offering is ready before
July 1, 2011. He surmised that it would be a public report with
a press release.
MR. SWENSON, in regard to a report, responded that the current
work being done on the project is the pipeline costing of the
different options. The secondary part of the project is to look
at right-of-way and permit issues, and once those issues are
finalized the project would be ready for a commercial offering.
July 1, 2011, would be a minimum date that that would be ready.
If it was ready beforehand, the legislature would be notified of
that date.
REPRESENTATIVE GUTTENBERG commented that July 1, 2011, seems
like a definitive date.
MR. SWENSON nodded yes.
7:03:02 PM
CO-CHAIR NEUMAN asked whether it is Mr. Swenson's intent as the
project manager to have all the permits ready to sell to an
independent person or company to build an in-state pipeline.
MR. SWENSON replied correct; it has always been the focus of
this project to get the permitting and engineering to a point
where it can be put out for a commercial offering to a
commercial entity or group of entities that would build the
pipeline.
7:04:11 PM
CO-CHAIR NEUMAN inquired whether it means that the state's ties
to that information and ownership of this project are severed if
the permits are sold to recoup the state's expenditures.
MR. SWENSON answered that that was the original intent, as was
stated by Mr. Noah in his presentation on December 15, 2009.
The project has continued with that process to get ready for
that commercial offering; the project has also been working with
various producer groups and pipeline groups, as well as
downstream consumers of the gas. That does not require,
however, that the state not invest in the pipeline. It is just
to put it out for that commercial offering once the project has
the permits and detailed costing in hand.
7:05:38 PM
CO-CHAIR NEUMAN surmised that if the state severs ownership it
would have no involvement and would not be beholden to the 0.5
billion cubic feet per day limitation on an in-state gas
pipeline.
MR. SWENSON responded he does not think it precludes the state
from being involved in the building of the pipeline. The only
thing the commercial offering does is offer a data set and three
permits - the state and federal rights-of-way permits and the
environmental impact statement permit - to a commercial entity.
It does not mean the state is precluded from investing in that
process.
7:07:26 PM
MR. SWENSON, in response to Representative Guttenberg,
reiterated that he does not believe a commercial offering
precludes the state from becoming involved in either the
financing portion of this, or in incentives on either the
upstream or downstream side, or actually being involved in the
construction process.
CO-CHAIR NEUMAN commented that maybe the permanent fund
[earnings] will finance the pipeline, should the people of
Alaska say so.
7:08:19 PM
CO-CHAIR JOHNSON asked whether Mr. Swenson would consider it a
responsive or non-responsive bid if someone made a bid to build
the pipeline that did not include reimbursement to the state.
MR. SWENSON replied that the current language on line 11 of
Amendment 1 suggests that the proposal must include
reimbursement for the cost incurred by the state. That does not
preclude the state from being involved in future activity,
future engineering, future bonding, or financing of the project.
CO-CHAIR JOHNSON said he reads this part of the amendment as
meaning there would be a no-call if proposals do not include
reimbursement for the cost incurred by the state, as opposed to
bringing something forth to the legislature to decide whether to
throw the state's cost into the pot to sweeten it so it would
reduce tariffs. He inquired whether this is also Mr. Swenson's
understanding.
MR. SWENSON answered that that is not his understanding of the
current language. He said this language came from the original
appropriations which provided that the work done by Mr. Noah and
the pipeline team was to be reimbursed by a second party or
commercial entity that would be building the pipeline.
CO-CHAIR JOHNSON asked whether that is in statute or is an
understanding of what Mr. Noah and the pipeline team wanted to
do.
MR. SWENSON responded he believes it is in the appropriations.
7:11:05 PM
REPRESENTATIVE GUTTENBERG inquired whether the reimbursement
could be in reduced tariffs similar to what is in the Alaska
Gasline Inducement Act (AGIA).
MR. SWENSON replied he believes it could be in any way that the
state becomes reimbursed for that money. However, it is
important to note that some of the data that has been used to
develop the project to date is actually data the state is using
with its partner, ENSTAR. Therefore, the state or the purchaser
would need to reimburse that group for that data set.
7:11:52 PM
CO-CHAIR NEUMAN asked what last year's appropriation was for the
in-state gas project.
MR. SWENSON answered $8.3 million.
CO-CHAIR NEUMAN noted that the governor's budget included
another $6.5 million for a total of about $15 million. Thus,
this portion of Amendment 1 would put a screeching halt to a lot
of things if the state is unable to sell the data and permits
for at least $15 million.
MR. SWENSON responded correct.
7:13:17 PM
CO-CHAIR NEUMAN further calculated that the total cost would be
more like $20-$25 million given that other state entities have
been funded to gather information, such as the Alaska Natural
Gas Development Authority (ANGDA).
MR. SWENSON replied that this $25 million invested by the state
for the permitting and initial costing estimates is a very small
portion of the overall engineering that must be completed. The
original fiscal note for the overall project is over $380
million just for the detailed engineering to get to a point of
sanction. That does not include the $500 million or greater for
the ordering of pipe, facilities, and cost associated with
building the pipeline. He believes the amount of work that has
been done and currently underway covers nearly all of the
possible options that could be used. He thinks this part of the
amendment specifically speaks to a pipeline company not coming
in without looking at the current data set done by the state and
ENSTAR and using that data for its proposal and reimbursing the
state for that work. It does not speak to the hundreds of
millions of dollars of work that will be necessary to bring the
project to sanction.
7:15:16 PM
CO-CHAIR NEUMAN maintained that this project would stop if the
July 1, 2011, deadline is taken out and the state does not get a
proposal from a company who wants to own the project and
reimburse the state.
MR. SWENSON answered he does not believe that is correct and an
alternate interpretation would be that if a proposal is not
received using the data and right-of-way permits provided by the
state, then the state can choose to move forward with either an
alternate commercial offering or continuation of the engineering
that is ongoing. There will not be a break in time specifically
for that. Amendment 1 attempts to provide an opportunity for
the state and its partners to be reimbursed for the work that
has been done to date, and that is all it does.
7:16:45 PM
CO-CHAIR NEUMAN said that if a company wanting to build an in-
state pipeline uses none of the state's information, then none
of this matters. If a company uses the state's information,
which is the hope, then the state gets some reimbursement on
those costs; however, he doubts reimbursement will be at 100
percent. He interpreted Mr. Noah to have been saying that the
project will attempt to recover the maximum amount possible and
hand the project off to private industry. Under the current
language in Amendment 1, he believes the state would be required
to receive 100 percent of its costs and if this did not happen
the project would be stopped.
MR. SWENSON responded he does not believe it would stop the
project; rather, it would stop the process of that request for
proposals.
CO-CHAIR NEUMAN said it would stop the process of the request
for proposals for building an in-state gas pipeline.
MR. SWENSON offered his belief that the reasoning behind the
language in Amendment 1 is to attempt to reimburse the state for
the costs to date, as was always stated from the beginning of
this project. If this language is not included, it is his
belief that a commercial entity coming into the request for
proposals would not offer that reimbursement of costs.
7:18:54 PM
CO-CHAIR NEUMAN suggested it could be said that the state will
do the best it can to make back as much of the invested money as
possible. There is a direct long-term benefit to the state in
providing jobs, he said, and he will be looking at the amendment
further in this regard.
MR. SWENSON said he understood.
7:19:42 PM
CO-CHAIR JOHNSON inquired whether treble damages would be queued
if the state took delayed payments for its costs or did not take
all the payments at once.
MR. SWENSON replied he does not know the answer at this time.
CO-CHAIR JOHNSON added that delayed payments would be a benefit
of getting to use the state's money over a period of time.
However, he said he is pretty sure that the intent of AGIA would
be violated if the state also offered the benefit to a company
of a pipeline that carries over 0.5 billion cubic feet per day.
While that is a policy call that would be made at that time, the
way this part of Amendment 1 is structured the state would have
a problem if a check is not written for 100 percent
reimbursement and the pipeline is designed for over 0.5 billion
cubic feet per day. He said he wants to ensure that the
legislature has that policy call and not some procurement
officer writing a request for proposals with this language.
When the request for proposals is issued, he wants it to be as
broad and open as it can possibly be to get as many people at
the playing table as possible and this portion of the amendment
does not do that.
7:21:34 PM
REPRESENTATIVE TUCK recognized that the reason for deleting "by
July 1, 2011, and take actions necessary" is because there is
still a lot of study to do on the 16 different options with 4
different configurations; therefore, additional time is needed
because the state does not want to commit in one direction or
another. However, the second change proposed by Amendment 1
would require a commercial offering by July 1, 2011. He asked
what the state would have for the commercial offering that is
different than what the state would have in the original
committee substitute which states that an in-state natural gas
pipeline would be begun by July 1, 2011.
MR. SWENSON answered it is important to understand the process
of building a pipeline of this magnitude. The work started by
Mr. Noah and Mr. Noah's team, which is the work that he is now
continuing, is the initial costing - the initial look at what
different configurations of the pipeline are feasible and
looking at what that cost of transport is. Those cost estimates
and that engineering are significantly less than being able to
construct. This initial scoping of the project is what any
reasonable pipeline company would do. To get to a position of
construction-ready the project must be taken to a much higher
level of engineering. A significant amount of detailed design
work is needed to get the project from the Class 4 estimates to
Class 3 and 2 estimates, and to get to the point where pipe can
be ordered or the project sanctioned. Once the project is
sanctioned, a significant amount of engineering design work has
been done, as well as hazards work, and work along the pipeline
route to ensure optimal location of the pipeline. All of the
initial scoping work will be done by July of this summer, at
which point all of the options will have been worked through and
the cost of transport completed. Work will then begin on the
cost of service from the North Slope to consumers. The next
phase of engineering is very, very detailed engineering. He
said Mr. Sparger is available to explain these details if the
committee wishes.
7:25:41 PM
REPRESENTATIVE TUCK understood that what the state will have by
July 1, 2011, is the basic scoping and cost for a commercial
offering. A much higher level of detailed engineering is
necessary to actually get the project underway. He surmised
that by having July 1, 2011, remain in the original committee
substitute, the expectation would be that the project is ready
to build; however, the state will not be there at that time
because all that will be done by then is a general cost estimate
of transportation.
MR. SWENSON responded correct.
REPRESENTATIVE TUCK noted that "Baker and Associates" is
performing much of the current work. He inquired whether the
duration of this consultant's services will be beyond or up to
July 1, 2011.
MR. SWENSON replied the current contract runs to July 1, 2011.
REPRESENTATIVE TUCK presumed that under this second change in
Amendment 1, the hope is for the state to get reimbursed for
"cost incurred by the state of data and interpretation of data."
He asked whether in addition to the cost of gathering the data,
the cost includes any legal or financial interpretation.
MR. SWENSON answered that specifically the data and
interpretation of the data is the engineering work for those
cost estimates, which is the work that has been done by "Baker
and Associates" and their subcontractors.
7:28:00 PM
CO-CHAIR NEUMAN called attention to the language on lines 12-13
of Amendment 1 which states, "The request for proposals must
include notice that proposals will be analyzed by the state,
together with terms and conditions for selection." He said he
thinks the intent of HB 369 is to have an in-state natural gas
development team be independent of that because right now there
is a lot of concern that the current in-state gas pipeline team
does not have enough independence. He inquired whether people
within the administration will analyze the proposals and have
the ability to decide whether to accept them.
MR. SWENSON responded the analysis of the proposals will be done
from fiscal and technical standpoints and looking at whether the
company proposing to build the project has the ability to
complete a project like this. Contractors will be hired to do
that analysis because there is not the full expertise in-house
to make determinations on the detailed engineering and the
costing. Therefore, it will be both the state and contractors.
CO-CHAIR NEUMAN surmised Mr. Swenson's answer was yes.
MR. SWENSON replied yes.
7:30:04 PM
CO-CHAIR NEUMAN said he still has concern about getting full
reimbursement of the costs. He understood Mr. Swenson will
depend upon outside analysis and experts on this, and allowed
that peer review is a good thing. He further understood that
this means the administration, not the development team, will
decide whether to move forward on this.
MR. SWENSON answered he believes the development team proposed
by HB 369 would be the primary group that analyzes the
proposals, not a single entity.
CO-CHAIR NEUMAN understood the proposals will be analyzed by the
state and if the state makes a finding that it does not like the
proposals it can say no and not accept the proposals.
MR. SWENSON responded correct.
7:31:23 PM
CO-CHAIR NEUMAN asked whether any of the 16 different options
include a cost analysis for both a 48-inch gas pipeline and a
24-inch line from Prudhoe Bay to tidewater.
MR. SWENSON replied the work he is specifically discussing here
is just for the 24-inch line from the North Slope to tidewater
in the Cook Inlet, with offtake points in Fairbanks. There are
numerous other options for bringing gas from the North Slope
into the Railbelt region. As proposed from the very beginning,
this project has been worked as a backup plan in case AGIA is
not finalized in a timely manner. If AGIA is sanctioned, the
necessity of running a 24-inch line to the North Slope would no
longer exist. So, if [an AGIA pipeline] is not sanctioned by
the time the "stand-alone" line is ready, then the state would
continue with the stand-alone line and the [pipeline capacity]
issue of more than 500 million cubic feet per day becomes a non-
issue because there would be no AGIA at that point in time.
CO-CHAIR NEUMAN understood Mr. Swenson to be looking at this as
a Plan B should a large diameter pipeline not work.
MR. SWENSON answered correct. It has been stated from the very
beginning of this project that it is a backup plan to the AGIA
process, or a large diameter line from the North Slope. The
cost associated with gas from a large diameter line into the
Railbelt would be - just from the standpoint of distance - much
less than gas from a single 24-inch line from the North Slope.
7:34:56 PM
CO-CHAIR NEUMAN stated he does not think of this as a Plan B and
that there is room for both projects to move forward. He said
he is very frustrated to be hearing this project is Plan B and
he believes the proposed provisions on lines 6-14 of Amendment 1
are more roadblocks.
MR. SWENSON replied that when he mentioned Plan B he was not
suggesting that his team is moving forward as a Plan B. There
is no plan to slow down the ongoing planning and engineering
process, he stressed. It will continue in parallel with the
ongoing planning process for the large diameter [AGIA] line.
When he says Plan B, he means it is a backup plan to the large
diameter pipeline because the gas associated with a 48-inch
line, and the state's ability to access that gas, will be
significantly cheaper than building a line to the North Slope
and the tariff associated with that. It does not mean his team
is slowing down or changing the process in any way while working
in consort. He stated his belief that when testifying before
the legislature Mr. Noah presented very similar views of this
project. The team is working incredibly hard to ensure that the
state has this as an option for in-state gas.
CO-CHAIR NEUMAN continued to disagree with Mr. Swenson.
7:38:09 PM
CO-CHAIR JOHNSON said Co-Chair Neuman is going down the same
road he is. He inquired whether Mr. Swenson knows why he is
before the committee today and why HB 369 was introduced.
MR. SWENSON assumed it is the frustration associated with a
pipeline not being built currently.
CO-CHAIR JOHNSON said that is a very good assumption. He said
another reason is that it also appears to him that a civil war
is going on in the administration. He said this project is not
a Plan B for the citizens he represents; rather, the big
pipeline ought to be Plan B. His priority is getting gas for
Alaskans. He said he is prepared to withdraw Amendment 1
because he sees nothing but delays and there is nothing in it so
far that excites him.
MR. SWENSON stated he and Co-Chair Johnson are exactly on the
same page. His first priority is getting gas as quickly as
possible to the citizens of Alaska, and that is his primary
objective in his job. When he says Plan B he is not meaning it
has to be at a later date or is an either/or proposition. The
way his team is working right now on this project is to make
sure that the state has availability of North Slope gas, which
is currently stranded, into the Railbelt region. His team is
working as quickly as it can with the budgets that have been
provided. The team is on track, under budget, and gas will be
supplied to the Railbelt whether it be via a stand-alone line or
a large diameter pipeline, if the projects move forward.
Amendment 1 is specifically to put the state in the position of
being able to go through the engineering effort that is required
to put together a project of this magnitude and provide a
commercial offering as of July 1, 2011, and, currently, his team
is on track with that. The project will continue forward
depending upon what the commercial offering provides and also
depending upon what the legislature decides to do at that point
in time as far as investment in the pipeline and continuing on
with the project to fruition for providing gas to both the Cook
Inlet and Fairbanks regions.
7:43:06 PM
CO-CHAIR JOHNSON surmised that from what Mr. Swenson is saying
this legislation is not needed.
MR. SWENSON responded he cannot address whether the legislation
is absolutely necessary. He said he believes a lot of the
language in HB 369 is being undertaken by his team, including
talking with the other agencies and making sure there is not a
civil war. He has worked with the Alaska Natural Gas
Development Authority (ANGDA) and the Department of
Transportation & Public Facilities (DOT&PF). He is more than
willing to work with any of the other state agencies and
entities, including the Alaska Railroad and the Alaska Housing
Finance Corporation, to ensure continued development of this
project. His team is moving forward in as quick a fashion as
possible and is trying to ensure that it is an optimized project
that will cost the least amount of money and provide the
majority of the gas to the majority of the people in the state.
He said he thinks the legislation as currently written will
cause significant issues with his team's ability to do the
engineering that will optimize that work. The amendments were
initially offered to help stay on the track that his team is
currently on and move the project forward.
7:44:50 PM
CO-CHAIR NEUMAN presumed that Mr. Swenson is about as frustrated
now as Mr. Noah was when Mr. Noah left. He posed a scenario in
which a 48-inch line is built from Prudhoe Bay to Fairbanks that
can carry 5.5 billion cubic feet per day, which would make 1.0
billion cubic feet per day available for in-state. The cost
estimates he has seen on such a line range from a difference of
$1.3 billion to $1.7 billion between a 24-inch line and a 48-
inch line, so he is assuming a medium difference between the two
lines of $2 billion. Pumping 4 billion cubic feet per day would
take four compression stations at $250 million each for a total
of $1 billion. To run those operating costs and the write-down
of those plants in five or six years would be another $1
billion. If both these projects are continued, the compressor
that is in the Prudhoe Bay gas treatment plant can move 1.0
billion cubic feet of gas per day down a 48-inch line with no
additional compressor stations. So now, $2 billion has been
eliminated from the cost to still have the availability of 1.0
billion cubic feet per day of gas in-state and still have the
availability to add four compressors. This would keep both
projects as Plan A.
7:48:49 PM
MR. SWENSON replied he is unsure on the math and costs
associated with the aforementioned scenario. He said the pre-
build line from the North Slope to Fairbanks has been discussed
by his team, and he thinks it is a viable option that should be
considered as things move forward as there would be time value
of money, as was discussed earlier. The amount of investment
associated with building a 48-inch line and compressor stations,
or at least being ready if a large export market is developed
and building from that 48-inch line whether through Canada or to
a liquefied natural gas (LNG) facility in Valdez, must be looked
at very carefully. He agreed that maximizing resource
development on the North Slope must be looked at for all of the
options. The North Slope has a significant resource and the
ability to access that gas and get it to market is critical in
the way forward of the state; the state must make sure to stay
open to all of the options.
7:50:11 PM
CO-CHAIR NEUMAN said the goal is to provide the maximum amount
of gas to as many people as possible, whether those people are
Canadian or Alaskan. He said he thinks the scenario he just
presented should be the number one scenario if it has not
already been included as one of the 16 scenarios currently under
consideration.
CO-CHAIR JOHNSON withdrew Amendment 1.
CO-CHAIR NEUMAN commented that the withdrawal of Amendment 1
will give members more time to consider it.
7:54:00 PM
MR. SWENSON, in response to Co-Chair Neuman, stated that the
current process in defining the 16 different scenarios will have
a number of different scenarios of compressor stations depending
upon the type of natural gas liquids that are going through the
pipeline and where the processing facility is located.
MR. SWENSON further explained there are four different pipeline
configurations. One configuration is a central gas facility
(CGF) residue gas only from North Slope gas conditioning, and
Cook Inlet natural gas liquid (NGL) extraction. In this
scenario the only gas being transported is the methane gas from
the slope and all of the impurities are taken out at the
conditioning plant on the North Slope and given back to the
producers. The second configuration is CGF residue gas only and
Cook Inlet gas conditioning and NGL extraction. In this
scenario the residue gas is taken to a conditioning plant in the
Cook Inlet region. The third configuration is CGF residue gas
only and North Slope gas conditioning and North Slope NGL
extraction. In this scenario the natural gas liquids are taken
out on the slope and the processing facilities are on the slope.
The fourth configuration is CGF residue gas spiked with CGF
stabilizer with North Slope gas conditioning and North Slope NGL
extraction. In this case the gas is transported with the
impurities and spiked to make sure it does not corrode the pipe.
MR. SWENSON added that each of the four scenarios will be
evaluated at four different throughputs: from 250 million cubic
feet per day on up to 1 billion cubic feet per day. Those
sizes, pressures, and fluid volumes will all have different
configurations of the pipeline; so there will be compressor
stations at different positions, different locations of gas
processing facilities, and each one of those has to be optimized
to the current conditions of the pipeline route.
CO-CHAIR NEUMAN observed that the total of 16 different
scenarios comes from analyzing the four different types of gas
at four different volumes.
MR. SWENSON agreed.
7:57:45 PM
REPRESENTATIVE KAWASAKI noted that Section 1 of Version E would
establish the position of in-state gasline project manager. He
understood that to be Mr. Swenson's current title.
MR. SWENSON responded correct.
REPRESENTATIVE KAWASAKI observed that among other things, HB
369, Version E, would establish the Joint In-state Gasline
Development Team composed of the Department of Transportation &
Public Facilities, the Alaska Natural Gas Development Authority,
and the Alaska Railroad. He presumed Mr. Swenson already works
with these entities and asked whether Mr. Swenson thinks this
provision is superfluous.
MR. SWENSON replied that it is correct his office is working
with the different agencies although he has not yet started with
the Alaska Railroad given he has only been on the job for two
months. From the standpoint of bonding, he thinks working with
the Alaska Railroad would be very important. In regard to the
other agencies identified by Version E, he has worked with the
Department of Transportation & Public Facilities to identify
right-of-way issues, as DOT&PF is the agency of application for
the right-of-way. He has also worked extensively with Mr.
Heinze of the Alaska Natural Gas Development Authority to ensure
collaboration and no duplication of work.
8:00:03 PM
REPRESENTATIVE KAWASAKI called attention to the provision in
Version E for establishing an In-state Gasline Steering
Committee composed of numerous agencies and individuals. He
said it seems counter-intuitive to add all of these entities as
far as streamlining and efficiencies go. He requested Mr.
Swenson to speak to this.
MR. SWENSON answered he cannot speak to a specific inefficiency,
but noted that there is a tremendous breadth and amount of
interest for in-state gas. While he is not speaking for the
sponsor, he believes the intent is to ensure the inclusion of
all the stakeholders in the process. Having that number of
people providing input may add to the timeline, but he cannot
specifically relate to that.
8:02:36 PM
REPRESENTATIVE TUCK summarized the provisions of Version E and
offered his understanding that the in-state gasline project
manager would continue for one year after the July 2011
commercial offering. He asked whether the Joint In-state
Gasline Development Team and the In-state Gasline Steering
Committee would continue to be needed.
MR. SWENSON responded he does not know whether the bill's
language provides for the steering committee to continue. The
assumption in the fiscal note is that after the commercial
offering has occurred the steering committee would need to meet
only once a year to keep everyone informed of the progress
towards first gas.
8:04:54 PM
REPRESENTATIVE TUCK understood that after the commercial
offering Mr. Swenson is forecasting the steering committee may
be needed only for receiving information and updates. He
presumed the development team would be needed until the project
is finalized.
MR. SWENSON replied correct, there are many decisions to be made
all the way through the engineering and construction path. The
DOT&PF, pipeline coordinator, and the funding groups will
certainly be necessary throughout that time and that would be
the case regardless of whether HB 369 passes.
8:06:01 PM
REPRESENTATIVE TUCK inquired whether the development team would
be privy to all of the private purchaser's information and
decision making.
MR. SWENSON answered that similar to the ongoing AGIA process,
the data being gathered through the engineering process is
confidential. However, the state's investment in that process
will require that the project team have access to that
confidential information and continue to work with the pipeline
builder to ensure the project moves forward as planned.
8:07:52 PM
REPRESENTATIVE TUCK, in regard to the earlier question about
whether this bill is necessary, recited the language on page 4,
lines 7-12, Version E, regarding cooperation and access to
information. He asked whether Mr. Swenson already has access to
all of the information or whether this language is needed for
Mr. Swenson to move further.
MR. SWENSON responded he believes it is important the language
at least addresses the confidential information that is
developed by the entity that is gathering it. Currently, his
team does have access to the information, such as the
confidential aerial photography, orthoimagery, and Light
Detection And Ranging (LIDAR) that was gathered along that
pipeline. While he cannot address at this time whether this
language is specific to the language that is necessary, a
significant amount of confidential information will be generated
and processed during the development phase of the pipeline.
REPRESENTATIVE TUCK understood Mr. Swenson currently has access
to that information.
MR. SWENSON replied correct.
8:10:07 PM
REPRESENTATIVE TUCK, in regard to "tidewater" on page 7, line 5,
Version E, inquired whether there is a definition of tidewater
that indicates it does not mean the North Slope coast.
MR. SWENSON answered he believes the language on page 7 is
specifically addressing the natural gas that is produced on the
North Slope north of the 68th parallel, which basically runs
through the middle of the Brooks Range.
REPRESENTATIVE TUCK noted it is not said on page 7 that it is
talking about the Cook Inlet distribution system.
MR. SWENSON replied he believes that also includes Valdez.
Tidewater would just be bringing North Slope gas to the southern
ice-free ports for the possibility of export from the state.
REPRESENTATIVE TUCK said he wants to ensure that tidewater does
not mean taking gas to the Beaufort Sea.
MR. SWENSON allowed clarification may be necessary.
CO-CHAIR NEUMAN, given the receding icecap, said he believes an
LNG facility on the North Slope or in northwest Alaska is an
option that has probably been discussed in board rooms.
REPRESENTATIVE TUCK said that is the reason why he is asking for
the clarification.
8:12:20 PM
REPRESENTATIVE SEATON, in regard to tidewater and Co-chair
Neuman's reference on a previous day to bringing a gasline to
the non-tidewater Donlin Creek Gold Mine, inquired whether Mr.
Swenson's reading of the bill would include a spur line to the
mine or would require clarification that this be allowed.
MR. SWENSON answered he assumes the reason for addressing
tidewater in the bill as written is to bring the pipeline all
the way to tidewater or into the Cook Inlet or Valdez regions.
It does not preclude offtake points anywhere along the route,
such as offtakes to the Donlin Creek Gold Mine, the Fairbanks
region, or the Interior.
8:14:05 PM
REPRESENTATIVE SEATON asked whether Mr. Swenson believes the
current Version E language would allow for a gas transmission
line to be extended from tidewater to go from Anchor Point to
Homer, a distance of approximately 14 miles.
MR. SWENSON, in regard to bringing the gasline to tidewater,
responded he believes it is the intent of the language to bring
it into the distribution system that currently exists in the
Cook Inlet. Extension of that system with the additional
resources that would be provided by this pipeline would
certainly be conducive to extending the current ENSTAR system,
such as an extension from Anchor Point into the Homer region or
any of the developments that could happen within the Cook Inlet,
as well as along route from the North Slope/Fairbanks area into
the Cook Inlet basin area or any part of the Railbelt. He
believes the language would not preclude that type of activity.
8:15:52 PM
CO-CHAIR NEUMAN reminded members that this is Mr. Swenson's
opinion, which may not be the same as the sponsor's intent.
REPRESENTATIVE SEATON noted he has been talking to the sponsor
about the extension and offtake issues, as well as a lateral
pipeline such as for Donlin Creek Gold Mine. He said he will be
offering some clarification language in this regard later on.
CO-CHAIR NEUMAN urged the receipt of amendments as soon as
possible so members have a chance to review them prior to
committee meetings.
8:17:09 PM
CO-CHAIR JOHNSON presumed there is some information that Mr.
Swenson does not have access to at this point.
MR. SWENSON nodded yes.
CO-CHAIR JOHNSON stated that the advantage of bringing the
Department of Transportation & Public Facilities, the Alaska
Natural Gas Development Authority, and others under one umbrella
would be to have that information. A confidentiality agreement
would build a certain level of confidence within those
organizations that the information would be held confidential.
This would increase the project's knowledge base and allow it to
proceed in a more expeditious manner. He said he believes there
is information that Mr. Swenson's team does not have, but needs,
and part of the intent of this bill is to bring all the parties
together to have that information while maintaining
confidentiality.
8:18:19 PM
CO-CHAIR NEUMAN asked whether Mr. Swenson is aware of any
information gathered by any agencies of the state that he does
not have.
MR. SWENSON replied one of the key issues is the current
engineering process and use of the most modern data available
along a 2,000-foot-wide corridor from the Cook Inlet Region to
the North Slope. A significant amount of data has been gathered
along that corridor from the many different times that these
different pipeline options have been looked at. Additionally, a
significant amount of data has been gathered along the current
railroad and DOT&PF right-of-ways and all of that information
would certainly be helpful. While the current initial
engineering work has the most modern data, additional
information such as subsurface information would help in that
process, as would any information within that corridor or
geotechnical work outside of that corridor.
CO-CHAIR NEUMAN requested Mr. Swenson to provide a list of the
information that would be helpful to him.
MR. SWENSON agreed to do so.
8:21:17 PM
CO-CHAIR JOHNSON inquired whether the Department of
Transportation & Public Facilities has been asked for
information by the in-state gas project manager or any other
pipeline entity.
FRANK RICHARDS, Deputy Commissioner, Office of the Commissioner,
Department of Transportation & Public Facilities (DOT&PF),
answered that the department worked previously with Mr. Harry
Noah and his consultants in regard to DOT&PF right-of-way
information. The department has a lot of right-of-way, but that
right-of-way is not defined as well as it should; thus, there is
a lot of information that has been asked for that DOT&PF has
been unable to give. He added the department needs to have more
detailed right-of-way analysis in terms of actual property
boundaries that can be shared with the project team.
8:22:15 PM
CO-CHAIR JOHNSON asked whether the department's fiscal note
accompanying HB 369 would allow for defining those property
lines. He further asked what else the fiscal note provides.
MR. RICHARDS responded that the fiscal note identifies the
personnel that would be established within DOT&PF. Such
personnel would include an Engineer V to act as a technical
expert for the DOT&PF commissioner while sitting on the
development team. An environmental impact analysis manager
would oversee the work done within DOT&PF's right-of-way to
ensure compliance with state and federal requirements within the
right-of-way. An administrative assistant would help with the
day-to-day functions of the engineer and analysis manager. The
fiscal note includes $1 million in capital cost to define the
right-of-way where the department does not have the clear legal
descriptions and, if acquiring more right-of-way is needed by
the in-state project, to go out and do those right-of-way
assessments and pre-acquisition development efforts.
8:23:52 PM
CO-CHAIR JOHNSON inquired whether there is anything in the
federal agreements that would prohibit the state from advancing
a pipeline within the right-of-way.
MR. RICHARDS replied the department currently permits utilities,
such as pipelines, electrical lines, and telephone cable,
through the right-of-way and that is allowed under the federal
provisions that the department operates under. The federal
highway would demand that a utility, in this case a pipeline,
not be permitted that conflicts with a future road alignment.
That is why, in the department's conversations with the in-state
pipeline project manager, it has been that DOT&PF gets
sufficient right-of-way to ensure a design that prevents those
conflicts that would then result in future costs.
8:25:19 PM
CO-CHAIR JOHNSON asked whether there are any places where
pipeline runs beside the road that would provide a history for
how to avoid right-of-way problems.
MR. RICHARDS answered the department will normally permit the
utilities within its existing right-of-way. The department has
not purchased right-of-way to allow for a utility to then come
into that right-of-way because the department has always had
sufficient right-of-way in place. In those cases where the
department has permitted a utility within the right-of-way and
later undertook a design effort that required moving the road,
the department was responsible for re-locating that utility and
the project bore the cost.
8:26:33 PM
CO-CHAIR NEUMAN noted that quite a bit of the proposed pipeline
route does not follow right along a road. He said he does not
think the department would have to purchase rights-of-way
because so little of the proposed route is along existing roads.
He surmised DOT&PF has looked at the proposed route.
MR. RICHARDS responded the department has looked at the concept
of the route in terms of places specifically identified by Mr.
Noah, such as along the Dalton Highway where there are some
areas in the right-of-way and some in close proximity to the
right-of-way. He and Mr. Noah discussed the concept of DOT&PF
acquiring that right-of-way from the Department of Natural
Resources or the U.S. Bureau of Land Management and then
providing if for the use of the pipeline. In further response,
he said the department has an application for the right-of-way
from the Department of Natural Resources.
8:29:24 PM
CO-CHAIR NEUMAN said he believes less than 100 miles of the
proposed pipeline route is along the highway.
MR. RICHARDS replied he does not know the actual mileage, or the
proximity, or which concept it is actually going take. The
geohazard analysis that Mr. Swenson talked about could result in
the route being moved. In the fiscal note, the department put
together its best indication of what it may take depending upon
what final route selection was made by the engineering studies.
CO-CHAIR NEUMAN inquired whether the fiscal note includes
funding for purchasing property from the Department of Natural
Resources.
MR. RICHARDS answered no, the capital dollars identified in the
fiscal note are for private or federal lands that may need to be
acquired and the funding is for hiring consultants to help in
that selection.
8:30:41 PM
MR. RICHARDS, in response to Representative Kawasaki, said that
currently DOT&PF is the applicant for the state lands from the
Department of Natural Resources and for the federal lands from
the U.S. Bureau of Land Management. In further response, he
said DOT&PF has the power to take land by eminent domain, but he
is unsure whether that would be allowed or prohibited for this
specific purpose. While the department has statutory authority
to construct pipelines, he would have to seek legal opinion on
the issue of eminent domain in this regard.
REPRESENTATIVE KAWASAKI requested he be provided with a copy of
this legal opinion.
8:32:53 PM
CO-CHAIR NEUMAN inquired where DOT&PF is at in the permitting
process.
MR. RICHARDS replied the permits he was referring to are in the
right-of-way permit applications to the Department of Natural
Resources for state lands that would be needed and to the Bureau
of Land Management for federal lands. Those applications were
completed in late November/early December [2009] timeframe. The
application process will likely take six to twelve months; he
offered to get back to members in regard to exactly how long.
In further response, he said the permits are for the crossing of
federal lands and state lands where DOT&PF would not have
existing lands that can accommodate the project.
CO-CHAIR NEUMAN surmised the permits do not include private
lands.
MR. RICHARDS answered correct.
CO-CHAIR NEUMAN presumed DOT&PF has eminent domain ability for
the taking of private lands.
MR. RICHARDS reiterated he would have to defer to legal counsel
to tell him whether DOT&PF has that power.
8:35:02 PM
REPRESENTATIVE KAWASAKI asked how much money DOT&PF has spent in
the last several years on the in-state natural gas pipeline
project development right-of-way.
MR. RICHARDS responded he is able to address only the most
recent efforts that were done with Mr. Noah and now Mr. Swenson.
After passage of the legislation that put Mr. Noah in place, Mr.
Noah came to DOT&PF asking for assistance and support in this
regard. Since passage of AGIA, the department liaison - the
development director for the natural gas pipeline - has been in
place. The liaison worked with Mr. Noah throughout the summer
and fall on those applications. No extra dollars were expended
because this position was already a permitted position within
DOT&PF. In further response, he said this position is currently
staffed by John Reeves of Fairbanks, who works on in-state and
large diameter gas pipeline issues related to DOT&PF.
8:36:56 PM
REPRESENTATIVE KAWASAKI noted that he earlier had an amendment
dealing with reimbursement for project cost incurred by the
state. He inquired whether Mr. Richards anticipates the costs
incurred for that work would be covered by this amendment.
MR. RICHARDS replied he does not believe DOT&PF's internal
costs, specifically Mr. Reeves' time, would be charged out. The
department has not had a large operating budget to define the
engineering analysis that is being done by Mr. Swenson's team.
As a landowner and as an engineering organization the department
is able to provide the support that it can, but it is mostly in-
kind support.
8:37:53 PM
REPRESENTATIVE TUCK asked whether Mr. Reeves was also doing the
same type of work with the Alaska Natural Gas Development
Authority.
MR. RICHARDS answered he believes Mr. Reeves was a member of the
Alaska Gasline Port Authority prior to coming to DOT&PF.
Subsequent to coming to DOT&PF, Mr. Reeves has worked with
ANGDA, but this work has been minimal. In further response, he
said DOT&PF has had correspondence with ANGDA, but it has not
been an extensive effort.
REPRESENTATIVE TUCK surmised Mr. Reeve's position was primarily
for right-of-way access no matter the entity asking for it, and
that Mr. Reeves had worked with Mr. Noah and ANGDA.
MR. RICHARDS explained Mr. Reeves was hired to initially work
with the AGIA applicant to look at the logistics and
infrastructure needs on the highways, bridges, and airports that
DOT&PF owns and operates to ensure that the department's
infrastructure could facilitate, rather than hinder, a large
diameter pipeline construction project.
8:40:01 PM
CO-CHAIR NEUMAN inquired whether Mr. Reeves still works for the
department.
MR. RICHARDS responded yes.
CO-CHAIR NEUMAN asked whether there was a point in time where
Mr. Reeves was the main person in charge of applying for the
permits for DOT&PF.
MR. RICHARDS replied yes.
CO-CHAIR NEUMAN inquired whether Mr. Reeves is still the main
person in charge of applying for permits for DOT&PF.
MR. RICHARDS said Mr. Reeves is currently out of state, so most
of the efforts for the in-state gasline are presently coming to
him through Mr. Swenson. In response to further questions, he
said Mr. Reeves is on vacation and doing some part-time work,
about five days a month, for DOT&PF. He explained that the
permit was assembled by Mr. Noah's team of consultants and Mr.
Reeves, in consort with Mr. Noah and Mr. Noah's consultants, was
the signatory on that permit.
8:41:49 PM
CO-CHAIR NEUMAN related that Mr. Reeves gave testimony on
December 15, [2009], that his work on the permits at DOT&PF was
to ensure that the in-state gas pipeline was expedited. He
asked whether he is now hearing that Mr. Reeves is not the lead
person ensuring that the permits are done.
MR. RICHARDS answered yes, that is Mr. Reeves' job, and the
permits have been submitted; so the work effort required by
DOT&PF is waiting for the permit process to go through its
internal workings at the Department of Natural Resources and the
U.S. Bureau of Land Management. In further response, he said
Mr. Reeves has been on leave without pay since January 2010.
8:44:10 PM
CO-CHAIR JOHNSON inquired whether the Department of
Transportation & Public Facilities is ready to go if HB 369
passes.
MR. RICHARDS responded that DOT&PF is game; the department likes
to construct roads, airports, and infrastructure, and it sees
the benefit of providing energy to Alaskans. In further
response, he said the department does not have a Plan A or a
Plan B, it is just ready to go.
CO-CHAIR NEUMAN asked whether Mr. Richards would place the in-
state gas pipeline as DOT&PF's highest priority.
MR. RICHARDS replied it would be the priority for those
individuals working on the project, provided DOT&PF has the
assets to do the work it is asked to do. The department has
numerous fronts that it works on - highways, aviations,
buildings, ports, harbors, and the marine highway system - and
all are high priority to the citizens of Alaska, and this
project would be high priority as well.
CO-CHAIR NEUMAN said he is upset that the person who had this
project as his number one priority has not been working at the
department since January.
MR. RICHARDS answered that Mr. Reeves is scheduled to be back at
DOT&PF at the end of this month or next month, and this is his
priority.
8:47:33 PM
REPRESENTATIVE TUCK reviewed the amount of travel and meeting
times budgeted in the fiscal note for the Division of Oil & Gas.
He inquired whether DOT&PF's budget will allow for its personnel
to meet this schedule.
MR. RICHARDS responded the department did include travel for
these meetings in its fiscal note for HB 369. In further
response, he said he does not recall how many meetings were
anticipated.
8:50:04 PM
REPRESENTATIVE KAWASAKI cited the various state entities that
would be involved in the project under HB 369 and noted that
these entities are already charged with certain duties under
current statute for assisting with getting an in-state gas
pipeline built. He asked whether Mr. Richards believes
communication is currently lacking so that this bill is
necessary to make a gasline happen.
MR. RICHARDS replied his personal analysis is the bill provides
an emphasis at the highest level of government to drive forward
this project and show its importance. The department does work
with the other entities named within the bill to be on the
development team. The commissioner of DOT&PF sits on the board
of the Alaska Railroad and Alaska Industrial Development and
Export Authority (AIDEA); therefore, that cross-communication
already exists and the department does work jointly with its
sister agencies to push forward priority projects.
8:52:06 PM
REPRESENTATIVE KAWASAKI inquired whether Mr. Richards believes
the addition of a steering committee with over 20 members will
help or hinder the process.
MR. RICHARDS answered that DOT&PF has an extensive public
process that it lives with daily for large or complex projects.
The department sets up meetings with the individuals that would
be most impacted by that project to hear their input, concerns,
and recommendations. That process has proved very beneficial in
meeting the needs of the public and stakeholders. Thus, the
steering committee can be of much benefit as long as everyone
knows the urgency and everything is done in a timely fashion.
8:54:27 PM
REPRESENTATIVE KAWASAKI commented he thinks both DOT&PF's and
DNR's processes are cumbersome; therefore he does not see HB 369
as moving the state in the direction of getting a gasline. The
development team and avoidance of duplication of studies and
plans are positives, but it seems this could be done without
writing a new section of law.
CO-CHAIR NEUMAN responded he is counting on the experience of
the sponsor in this regard.
8:56:04 PM
REPRESENTATIVE SEATON noted that while the bill has the 2011 and
2015 timelines, he does not see a timeline for an open season.
He asked where an open season comes into this timeline, given
that open seasons are a critical factor in timing and planning
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, sponsor
of HB 369, replied the bill does not specify dates for an open
season. He said he does not believe the AGIA process specifies
a specific date either. While he does not have a specific date
for an open season, he feels HB 369 is the best way to get to an
open season for in-state gas.
8:58:38 PM
CO-CHAIR NEUMAN cited the language on page 3, lines 13-14,
Version E, that states "take actions necessary to enable natural
gas to flow down the pipeline by 2015." He said those actions
will be determined by the development team as it goes through
the process.
MR. SWENSON explained that an open season process is regulated
by the Federal Energy Regulatory Commission (FERC) - if the
pipeline is a FERC-regulated pipeline. However, it is assumed
that the in-state gas pipeline will not be regulated by FERC and
will instead be coordinated by the U.S. Bureau of Land
Management. For a non-FERC pipeline, there is not what is
termed an open season. Rather, after the commercial offering,
the entity building the pipeline will go to other companies,
including producers and consumers, to marry that relationship
between the producer and the consumer.
9:00:13 PM
REPRESENTATIVE SEATON inquired whether an in-state, non-FERC
process requires open access bidding. In response to Co-Chair
Neuman, he said he understands the FERC process but not the in-
state non-FERC process. Therefore, he is asking whether the in-
state process is open to all comers like it is for an open
season under the FERC process.
MR. SWENSON explained that current pipelines in the Cook Inlet
region carrying gas between different units and to consumers are
common carriers and are regulated by the Regulatory Commission
of Alaska (RCA). A single entity building a pipeline between
its facility and its reserves does not have to be common
carrier, but an in-state gas pipeline would be RCA regulated
similar to what is seen in the Cook Inlet. In further response,
he said he would like to defer this question until he can get
legal counsel to make sure he is answering correctly, but it is
his understanding that this in-state gas project would be a
common carrier and regulated through the RCA.
9:03:44 PM
CO-CHAIR NEUMAN requested members to provide any amendments to
other members at least 24 hours before the next meeting.
REPRESENTATIVE TUCK advised he may look into an amendment that
defines tidewater.
CO-CHAIR JOHNSON urged that amendments be prepared for the next
meeting so the bill can be acted upon at that time.
[HB 369 was held over.]
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