Legislature(2011 - 2012)BARNES 124
02/06/2012 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 9 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 9-IN-STATE GASLINE DEVELOPMENT CORP
1:05:53 PM
CO-CHAIR SEATON announced that the only order of business would
be HOUSE BILL NO. 9, "An Act requiring the Joint In-State
Gasline Development Team to report to the legislature
recommended changes to state law that are required to enable or
facilitate the design, financing, and construction of an in-
state natural gas pipeline so that the in-state natural gas
pipeline is operational before 2016; and providing for an
effective date."
1:06:43 PM
CO-CHAIR FEIGE moved to adopt the proposed committee substitute
(CS) for HB 9, Version 27-LS0075\U, Bullock, 1/19/12, as the
working document. There being no objection, Version U was
before the committee.
1:07:07 PM
REPRESENTATIVE MIKE CHENAULT, Alaska State Legislature, speaking
as prime sponsor, paraphrased from the following written sponsor
statement [original punctuation provided]:
Nearly two years ago, the Legislature passed HB 369
advancing an instate natural gas pipeline. Since that
time, the Alaska Gasline Development Corporation
[AGDC] has made tremendous progress developing a
project along a solid timeline. It is imperative to
maintain that momentum in pursuit of instate gas for
Alaskans, while keeping open all options for
participating in an aligned project.
This legislation will refine a solid, early proposal
into a plan that the Legislature can decide to
sanction or not. This legislation does not sanction
construction of an instate gas pipeline, but allows
AGDC to advance to that stage. The bill will also
provide AGDC the tools to build its capacity to be a
strong, participating partner in an aligned gasline
project.
Along with a comprehensive update on progress to date,
this summer AGDC presented the Legislature with a
series of recommendations enabling the next stage in
project planning. Those recommendations are
incorporated within this committee substitute.
It is my intention to provide AGDC the tools that will
allow them to refine a plan to the point of
sanctioning by the Legislature. The state has
invested hundreds of millions of dollars over the
years in pursuit of our dream of gas, but we've
consistently been held back by various roadblocks,
internal and external, political and commercial. I
want to clear those for this project.
This legislation is enabling and does no harm. It
would facilitate gas development in the state of
Alaska even if the project already on the table - AGIA
[Alaska Gasline Inducement Act] - develops. It would
also facilitate instate gas should we see the
alignment of interests and projects the Governor is
encouraging among commercial parties and others
interested in both commercialization of North Slope
gas and delivering Alaska's gas to Alaskans.
1:09:36 PM
REPRESENTATIVE CHENAULT added that HB 9 incorporates a number of
other pieces of legislation that the House of Representatives
has already dealt with. It incorporates House Bill [369]
[Twenty-Sixth Alaska State Legislature] which started an Alaska
gasline development corporation pipeline fund. That fund was
funded last year with $200 million in the capital budget, but
until that piece of legislation is passed that money is just
sitting there. Also incorporated into the proposed bill is HB
215, pipeline project judicial review, which would limit the
challenges of right-of-way leasing decisions similar to the
protections that were offered during the Trans-Alaska Pipeline
System (TAPS) project. Another bill incorporated into HB 9 is
HB 189, which would allow AGDC to enter into confidentiality
agreements. A number of other things would be done by HB 9,
most of which were requested by AGDC. He said HB 9 would get
rid of roadblocks and would allow [AGDC] to get to a point of
seeing whether there is a project to sanction.
1:11:43 PM
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, speaking
as a sponsor of HB 9, endorsed Representative Chenault's
presentation of what Version U would do. He said he has been
working with Representative Chenault since the introduction
several years ago of the bill that started this project. That
legislation created the Joint In-State Gasline Development Team
within Alaska Housing Finance Corporation (AHFC), and that team
has accomplished and surpassed his greatest expectations for
developing a project plan and advancing this project. He
explained that HB 9 would formalize the project and would also
formally recognize the Alaska Gasline Development Corporation
(AGDC) as an entity in state statute that is able to go forward
and develop this project. The Joint In-State Gasline
Development Team would be disbanded because it would no longer
be necessary with the establishment of AGDC.
REPRESENTATIVE HAWKER said the proposed legislation is a
reasonable package of empowerments commensurate with the state
mission of getting state gas to benefit Alaskans the most. This
package of empowerments would broadly enable AGCD with the
authorities it needs to participate in any gasline development
possibility within the state. It is recognized that legislators
are not in the position to be saying that Alaska's gas shall be
marketed in exactly a certain manner. Being that prescriptive
has already been proven as not being the most efficacious method
of marketing Alaska's gas. The proposed bill is very much
intended not to be specific, but to provide the broad support
and authorities AGDC needs to move Alaska's gas to market. It
would provide a framework that ultimately allows the State of
Alaska to participate in the development of its own gas,
eliminate competing objectives around the state, and bring the
state's commercial interests, community interests, and
industrial interests together to finally see a project started.
1:14:30 PM
CO-CHAIR SEATON offered his understanding that the vision of HB
9 is that AGDC would be able to participate as an owner in any
gas pipeline in Alaska.
REPRESENTATIVE HAWKER responded yes, a foundational premise of
Version U is that it enables AGDC to specifically design,
construct, and owner/operate a pipeline on its own, or
participate with other entities as a joint venture partner or
working interest holder or otherwise, for the purpose of
building a project that enables delivery of gas from any point
in the state to any point in the state that is in the best
interest of the state's communities.
1:15:44 PM
REPRESENTATIVE HERRON inquired whether the proposed bill is a
pressure vessel or a lubricant for gas delivery by anyone to
Alaskans.
REPRESENTATIVE CHENAULT replied it is currently unknown exactly
which it will be. A number of people envision a gasline to
different areas of the state. By all intent, the letter of the
law is being followed; for example, gasline size. While he
cannot say today whether this gasline will go to Anchorage or to
Valdez, the alignment that must happen for a project to go
forward is happening. No matter how big a gasline people wish
for, it is economics that will drive the line's size, where it
will go, and who it will service. He said his intention is to
make sure that as many Alaskans as possible are serviced by
either this pipeline or products off of this gasline.
1:18:02 PM
REPRESENTATIVE CHENAULT added that while he cannot say what that
will look like in the next 5-20 years, he can say that over the
past 30 years a number of projects have been shelved for one
reason or another. He said his intention with HB 9 is to ensure
the state has a project that is going forward and that it not
bring gas just to Southcentral which has gas from Cook Inlet.
While gas from Cook Inlet helps Southcentral, it does not
necessarily help Fairbanks or Bethel or other areas of the
state. He said he thinks the natural resource that is 800 miles
away at Prudhoe Bay can be developed, and developed reasonably,
and provide a profit to the citizens of Alaska and the State of
Alaska. So, while he cannot say whether it is just a vessel or
a real project, he can say the state will never have a gas
pipeline as long as it continues to kill any project out there.
1:19:59 PM
REPRESENTATIVE HAWKER, addressing Representative Herron's
question, offered his belief that the proposed legislation is
crafted to empower and enable AGDC to both push and pull an
Alaska gas pipeline project together. It would empower AGDC to
push its own economically viable project to bring Alaska's gas
to Alaskans and it enables AGDC to pull together the various
interests in the state in marketing Alaska's gas. So, it is a
symbiotic relationship that attempts to eliminate the competing
objectives that have plagued the state to date and bring all
Alaskans together and all the commercial interests together into
an alignment that actually gets a pipeline project started.
1:21:01 PM
REPRESENTATIVE KAWASAKI noted that the Alaska Natural Gas
Development Authority (ANGDA) was established by a 2002 ballot
measure which stated that an all-Alaska gasline would maximize
jobs, maximize revenues to the state treasury, and provide
access to gas for Alaskans. The measure was billed as a way to
have an Alaska gasline in full production by 2007. He observed
that HB 9 would pull ANGDA under the auspices of the Alaska
Gasline Development Corporation (AGDC), and asked why that would
be necessary and whether ANGDA could stand on its own to do what
HB 9 would do.
REPRESENTATIVE CHENAULT answered that he cannot explain all the
ambiences of ANGDA. For a number of years he was one of ANGDA's
biggest supporters and as co-chair of the House Finance
Committee he tried to make sure that ANGDA had the necessary
funding for moving its projects forward. He said he believes
ANGDA has done some good work, especially dealing with propane.
However, other people may say that ANGDA did not accomplish its
job. The issue with trying to put ANGDA into HB 9 deals more
with being able to utilize the good work that ANGDA has done and
to try to put it into a program that may go forward. He said
AGDC is moving forward, while for whatever reason ANGDA never
made it off the ground, but that was not due to the lack of
trying by some legislators.
1:23:33 PM
REPRESENTATIVE P. WILSON inquired how the authority would be
given to AGDC and would there be any oversight of AGDC.
REPRESENTATIVE HAWKER responded that this question goes to the
one asked by Representative Kawasaki about the role of ANGDA to
the future. He explained that within HB 9, AGDC is recognized
as a stand-alone public corporation that will be managed
administratively by a statewide board of directors. At this
time, that board of directors would be the board of directors of
the Alaska Housing Finance Corporation (AHFC), which represents
very broad interests across the state of Alaska. Likewise, HB 9
would preserve the integrity and complete existence of ANGDA
under the same board of directors. Essentially, both
organizations are preserved with a common board of directors,
bringing aligned management and aligned mission to these two
entities and eliminating competition between them. The bill
would empower AGDC to be a project developer and manager - a
construction company - whereas ANGDA's mission is being
clarified and refined to that which will enable it to be the
entity that markets Alaska's gas; ANGDA will take, handle, and
manage the monetization of Alaska's gas in joint relationship
under common management. This would not be something that just
happens by itself, it would be very much under the management of
a board of directors.
1:26:03 PM
REPRESENTATIVE P. WILSON noted that the Alaska Railroad is an
entity by itself, but when it wants to do something major it
comes back to the legislature for permission. She asked whether
[AGDC and ANGDA] will be required to report to the legislature
once in awhile.
REPRESENTATIVE HAWKER answered that the ultimate decision to
move forward to sanction, develop, and commit to executing a
project still remains with the legislature. The proposed bill
would not sanction any project; it would allow the further
refinement and development of a project that must come to the
legislature for funding and execution.
REPRESENTATIVE P. WILSON said she wanted to make sure that that
was on the record in case there are any questions and so that
Alaskans across the state can know.
1:27:26 PM
CO-CHAIR FEIGE said his reading of HB 9 is that it would
authorize construction of any pipeline and would not necessarily
favor one project or route over another. Putting that into the
context of what is already in progress, he noted that AGDC has
applied for an environmental impact statement (EIS) and the only
route that has been presented as part of that EIS goes from the
North Slope to Southcentral direct to Anchorage. He understood
there was one other route that went along the Richardson Highway
and then from Glennallen over to Southcentral, but for a variety
of reasons that route was tossed out. Given that [the EIS] is
currently in progress, he said the perception to him and his
constituents is that the winner has already been picked and HB 9
is simply to get all the stars aligned to support that which has
already been decided.
REPRESENTATIVE HAWKER deferred to AGDC administrators for an
explanation of the decision-making process that went into the
project routing and management for the EIS. From the standpoint
of legislators, he said that HB 9 would change the definition of
in-state pipeline to be any sort of project that delivers gas
in-state from Point A to Point B. The sponsors are looking to
establish an entity that will be durable and a part of Alaska's
future all across the state. It is not looking to be a single
activity entity; it will not build a pipeline and then go away.
The idea is for it to be Alaska's in-state gas facilitator,
where ever and how ever a project might develop that is
economically viable. He emphasized that [the sponsors of HB 9]
absolutely are contemplating a long-term gas future in the
state, something that must begin by getting a viable project
started that monetizes gas and further empowers this entity to
then continue to look out for the best interests of all
communities across the state.
1:30:31 PM
CO-CHAIR SEATON noted that the bill title on page 1, line 6,
states "development or construction of an oil or gas pipeline"
asked whether there is any restriction in HB 9 that would limit
this to natural gas or would there be authority to build oil
pipeline. He pointed out that one option of the low flow study
from TAPS was a 30- to 36-inch oil pipeline down maybe to
Glennallen and then conversion of the 48-inch TAPS pipeline to a
lower pressure gasline. He asked whether [HB 9] would also
qualify for the building of that oil line or the oil line in
association with converting that section of TAPS into a gasline.
REPRESENTATIVE CHENAULT responded that HB 9 would amend the
section of oil and gas statute that deals with oil and gas
pipelines so that it would deal with just gas, and therefore oil
is in the title of the bill.
1:32:46 PM
CO-CHAIR SEATON commented that during the sectional analysis it
can be figured out whether the authority is also there for oil.
In monetizing gas, he said he would like to understand the low
flow study option of building a 30- or 36-inch oil line right
along the TAPS line and then converting the current 48-inch TAPS
pipeline to a gasline and delivering gas that way all the way to
Glennallen. He inquired whether that would be covered under the
options of HB 9. He said he is bringing this up because it was
brought to legislators by Alyeska Pipeline Service Company as
one of the options in the low flow conditional studies.
REPRESENTATIVE HAWKER replied that the definitions in Section 7
of HB 9 answer the co-chair's point. This section defines
"Alaska Gasline Development Corporation" as "the corporation
created ... for the purpose of planning, designing, financing,
developing, constructing, owning, and operating an in-state
natural gas pipeline". The section further defines "in-state
natural gas pipeline" as "a pipeline for transporting natural
gas in the state." Thus, if it involves a pipeline and it
involves transporting natural gas, it is within the scope of the
proposed legislation.
CO-CHAIR SEATON said this will be talked about going forward to
ensure that those things brought to the committee by industry as
potentials are included. He understood that the object of HB 9
is to get a broad sweep to monetize gas and he wants to know how
far that goes.
1:35:16 PM
REPRESENTATIVE GARDNER read from the Regulatory Commission of
Alaska's web site, which states that the commission is
authorized [under Alaska Statutes 42.04 - 42.06 and other
statutes] to do the following [original punctuation provided]:
... regulate public utilities by certifying qualified
providers of public utility and pipeline services and
to ensure that they provide safe and adequate services
and facilities at just and reasonable rates, terms,
and conditions. This keeps rates as low as possible
while allowing the regulated entities an opportunity
(but not a guarantee) to earn a fair return.
REPRESENTATIVE GARDNER understood that Sections 25-27 of Version
U would exempt this proposed pipeline from regulation by the
Regulatory Commission of Alaska (RCA) and asked the reason for
this proposed provision.
REPRESENTATIVE CHENAULT answered that the RCA was asked to
review [the proposed provisions] for any problems it may have
with them, but he has not yet heard back. He said that when
talking utilities, this pipeline would be RCA controlled. That
control would come in when there is an actual pipeline and there
is an agreement to sell that gas to a utility. At that point
the RCA would step in to make sure that consumers are protected.
1:37:21 PM
REPRESENTATIVE HAWKER added that in the broadest sense [Sections
25-27] have been referred to as the RCA exemption, but he does
not feel that exemption is the correct connotation. He said the
driving force behind these proposed provisions is to eliminate
duplicative regulation and eliminating regulation where one
agency of the state is attempting to regulate another agency.
One significant element is the issue of not regulating a
contract between AGDC, a state public entity, and a utility
because at the end of the day consumer protection exists in the
regulation between the utility and the consumer. Thus, consumer
protection is maintained but duplicate regulation is eliminated.
A second element is the issue of the certificate of public
convenience and necessity determination finding that the RCA
would do for a project brought forward in the public sector as a
private effort, in which the RCA determines whether there is a
valid public purpose to the project. In this case, if a project
goes forward, it would be a legislative decision. He submitted
that if the legislature chooses to move a pipeline project
forward a regulatory agency should not be second-guessing the
legislature's determination that it is in the best interests of
the state.
1:39:10 PM
REPRESENTATIVE P. WILSON observed that page 4 of the sectional
analysis states that Section 27 would exempt AGDC from oversight
by RCA until all debts have been paid [on the project]. She
further observed that Section 28 [would exempt AGDC and any
pipeline developed ... from the Pipeline Act, which,] generally
speaking, places pipelines and pipeline carriers in Alaska under
the regulations of the RCA. She requested further explanation
of these two sections.
REPRESENTATIVE HAWKER explained that Section 28 is the issue of
the Alaska Pipeline Act, which is where the requirement for the
certificate of public convenience and necessity exists. He
reiterated that the reason for this exemption is so there is not
an agency charged with second-guessing the legislature when it
comes to making those determinations of the public value and
benefit. If the legislature makes that decision, he said he
believes that should be over-riding. Section 27 gets into the
financing portions of this work. It is an entity controlled by
the Alaska Gasline Development Corporation that is exempt for
the period in which the debt is incurred. That is to enable the
AGDC entity to go into the open market to contract for long-term
debt. This provision is so that when going to the market there
can be efficient execution of that debt agreement, thereby
avoiding penalties and unnecessary constraints on that
transaction. The better execution of a debt transaction that
the state can get, the less costs are ultimately accumulated
that would then have to be recovered through the tariff
structure. Once the debt is paid the exemption from AS 42.05
would go away and the project would become subject to [RCA]
regulation.
1:42:34 PM
REPRESENTATIVE P. WILSON surmised that [on a federal project]
the Federal Energy Regulatory Commission (FERC) might regulate
the size of the pipeline; however, at the state level, Version U
would preclude the RCA from being involved and making those
types of restrictions.
REPRESENTATIVE HAWKER replied that if AGDC entered the debt
market, it would go there with the firm transportation
commitments and with contracts potentially between itself and
utilities to be purchasing this gas. These would be AGDC's
assets or collateral. Once that commitment is made in the open
marketplace, this would prevent a regulator from coming in
sometime in the future and changing those rates to not allow
recovery of all the costs. It would provide certainty in the
financial marketplace for the period in which debt is
outstanding.
1:44:14 PM
REPRESENTATIVE P. WILSON offered her understanding that when the
RCA looks at tariffs it is supposed to allow for profit, which
would be to pay back those costs. She requested some examples
of why this provision is being proposed.
REPRESENTATIVE HAWKER deferred to AGDC, its counsel, and the RCA
to answer the question because it gets into technical, project-
specific details.
1:45:21 PM
CO-CHAIR FEIGE presented a scenario in which the legislature
decides to go forward with a gasline and to finance a portion of
it. One option would be to put it on the open market and by
AGDC not falling under the RCA for that period of time, it would
give the potential lenders the certainty that adequate revenue
could be reaped for repaying the bonds.
REPRESENTATIVE HAWKER answered that providing certainty and
assurance in the financial marketplace is very definitely the
conceptual effort behind these provisions. The codicil to that,
he added, is that the public, the consumer, maintains its
protections through the RCA through the regulation of rates
between utilities and the consumer.
1:46:39 PM
REPRESENTATIVE MUNOZ inquired how this new arrangement would
comport with the commitments made by the State of Alaska under
the Alaska Gasline Inducement Act (AGIA).
REPRESENTATIVE HAWKER responded that under Version U the project
that was undertaken by the Joint In-State Gasline Development
Team would become acknowledged as the Alaska Gasline Development
Corporation. He said the project is, and always has been,
structured, designed, and committed to be fully compliant with
the AGIA framework.
REPRESENTATIVE CHENAULT added that he looks at these provisions
as giving the in-state gas pipeline project some of the same
powers that the state has given to TransCanada and ExxonMobil
through the AGIA process. The half billion [cubic feet] under
which this proposed pipeline has been designed to operate is in
keeping with the framework of AGIA.
1:48:19 PM
CO-CHAIR SEATON, in regard to not having RCA or Pipeline Act
regulations, asked whether there is a potential that firm
transportation commitments from producers are not needed when
going to the bonding community because the State of Alaska is
being relied upon as the owner of this project.
REPRESENTATIVE CHENAULT replied that the intent is to have firm
commitments and not put the state at risk.
CO-CHAIR SEATON stated that when the AGDC representatives
testify he would like them to provide clarification and details
about the exclusion and whether excluding firm transportation
commitments is to be the basis of the bonding.
1:50:00 PM
REPRESENTATIVE HAWKER added that in moving this proposed bill
forward, it is neither his nor Representative Chenault's intent
to dictate how a project is ultimately financed. The Joint In-
State Gasline Development Team was entrusted with that mission
and now it would be AGDC. The benchmark and check is that to go
forward the project must come back to the legislature for
sanctioning and funding. Tradeoffs will be looked at by AGDC
when bringing a project forward. One tradeoff is that the
greater the amount of state investment the less the tariff would
ultimately be and the more economically feasible the project
becomes to market Alaska's North Slope gas. He offered his
personal belief that everyone would be best served, as has been
accomplished to date, if the project is looking at being
economically viable in the commercial marketplace as any other
project to monetize Alaska's gas.
1:51:47 PM
CO-CHAIR SEATON recalled that during the Alaska Stranded Gas
Development Act the state was attempting to be a 20 percent
participant in the gasline and at issue was the state regulating
itself and how as a minority participant it might not be at a
disadvantage. He inquired whether those issues are still to be
resolved in HB 9.
REPRESENTATIVE CHENAULT deferred to AGDC to answer the question.
1:52:37 PM
REPRESENTATIVE GARDNER, in regard to the statement that the HB 9
would give an in-state gas pipeline project some of the same
powers the state has given to TransCanada and ExxonMobil,
requested an enumeration of those elements and asked which of
these elements are unique to these two projects and would not
apply to any others.
REPRESENTATIVE CHENAULT responded that there are a number of
issues, one being eminent domain in regard to AGIA. He said
these will be gone through during the sectional analysis. In
further response, Representative Chenault agreed to provide
Representative Gardner with a separate listing of these.
The committee took an at-ease from 1:54 p.m. to 1:55 p.m.
1:55:48 PM
DAN FAUSKE, President, Alaska Gasline Development Corporation
(AGDC), CEO, Alaska Housing Finance Corporation (AHFC),
Department of Revenue (DOR), in response to Co-Chair Seaton,
explained that the Alaska Gasline Development Corporation is a
subsidiary of the Alaska Housing Finance Corporation. He said
AGDC is managed by him as well as by the AHFC board of
directors. The AGDC is tasked with developing an in-state gas
pipeline at the lowest possible cost to Alaskans and AGDC
delivered its report to the legislature last July. That report
generated enthusiasm and desire to keep the project and process
going, so AGDC has done that. He noted that the AGDC office was
recently re-located to a larger space and it has continued to
add technical people. Other than himself, Mr. Joe Dubler, and a
couple of others, he said the majority of AGDC staff are retired
and/or contract individuals from the petroleum and gas industry,
including two PhD physicists.
1:58:12 PM
MR. FAUSKE reported that the proposed pipeline would stretch 737
miles from Prudhoe Bay to Port MacKenzie and would be 24-inches
[in diameter] and [at a pressure of] 2500 pounds per square inch
(PSI). Yet to be determined is whether it will carry "dirty" or
enriched or dry gas. In the 2013 open season, industry will
tell AGDC what it is interested in doing. He said AGDC has done
advanced studies on natural gas liquids (NGLs), liquefied
natural gas (LNG), and gas-to-liquids (GTLs) and has published
those studies and put them on its web site. At the time of the
studies, the most likely end-use product of this project was
determined to be LNG because it would provide the greatest
netback to the producers. However, AGDC has reserved the right
to see what will happen in an open season process when people
come forward and state what they are willing to do. He
explained that AGDC is restricted to 500 million cubic feet of
gas per day under the tenants of the current AGIA. That
restriction would only be lifted if it is below the 68th
parallel; for example, if a large field of gas was hit in the
Nenana Basin or somewhere else below the 68th parallel.
Therefore, AGDC has operated under the 500 million cubic feet of
gas per day and that has worked well.
1:59:53 PM
MR. FAUSKE related that last summer AGDC held an expression of
interest meeting and the room was filled. He said AGDC is
anticipating a total gas consumption of about 240 million cubic
feet per day for Fairbanks, the Railbelt, and on down into
Kenai, which at a cap of 500 million cubic feet per day leaves
260 million cubic feet per day that needs to be filled.
Therefore, [at the meeting] AGDC was very pleasantly surprised
to find that gap filled. The agreements are non-binding, but
there was a definite commercial interest in the excess gas for
current commercial and normal use. Under the confidentiality
agreements he cannot say who it was, but it was encouraging to
have that type of interest.
2:01:06 PM
MR. FAUSKE noted that his first question when he hears
discussion on "the big lines" is who pays for it. The
incremental cost of a 48-inch line from Prudhoe Bay to Fairbanks
is $2.8 billion, which is a lot of money if there is not a large
commercial enterprise at the end of that pipe. The RCA would
look at that as overbuilt and would say that the builder cannot
monetize or capitalize those costs through the ratepayer,
meaning the builder would have to "eat it." However, he
continued, that is a decision government could arrive at if it
decided that it wanted to go to a bigger development. Under
AGIA's guidelines there is the ability to go from 1 billion to
3.5 billion [cubic] feet of gas a day to Valdez for export, and
it remains to be seen whether that open season was successful.
When AGDC is asked why it did not go to Valdez, the answer is
that AGDC is limited to 500 million [cubic] feet [per day] and
another entity contracted with the state is already over there;
thus, it would have been an interference and likely not a
worthwhile mission for AGDC to undertake with its study.
2:02:34 PM
MR. FAUSKE, regarding [a route along] the Richardson Highway
versus the Parks Highway, explained that a lot of work and
studies had already been done when AGDC came on board. The
language in House Bill 369 directs that Alaskans be supplied gas
at the lowest possible cost. The Richardson Highway is 93 miles
longer than the Parks Highway and at $5 million per mile it gets
to be serious money in a hurry. In its research AGDC could find
no mitigating circumstances that said that initial $500 million
would make it worthwhile to pursue the [Richardson] route. The
federal government, when looking at a reasonable alternative
approach, agreed there were no mitigating circumstances.
Therefore, following the basis of House Bill 369, the proposed
route at this time is to come down the existing Trans-Alaska
Pipeline System (TAPS) right-of-way, then dogleg to the right at
Livengood heading toward Minto, then down across the Minto
Flats, and then down onto the Parks Highway right-of-way and the
railroad right-of-way to Port MacKenzie.
2:04:06 PM
MR. FAUSKE said the draft environmental impact statement (EIS)
was authorized and recently went on the Federal Register for 45
days of public comment, which is being conducted by the U.S.
Army Corps of Engineers. The corps will hold public meetings in
the communities along the proposed route. As the applicant,
AGDC must be present at all of those meetings. At the end of
that process, if successful, there will be an EIS and with that
comes the federal right-of-way. He said the critical thing is
to get the work done and the EIS in possession because it gives
the state a great deal of leverage. The federal government
becomes very skeptical when things start to change. In his
opinion, he continued, the smartest approach is to get the one
that is on file done so as this process moves forward there is
some room to move and maneuver.
2:06:03 PM
MR. FAUSKE shared that the governor and others have talked about
alignment and said he believes those discussions will bear some
fruit. At that time, supplements to the EIS could be looked at
to consider some alternatives. However, while suggestions to
move the pipeline to another route may sound good, it is not
that easy because it means starting all over if it is a totally
different route. While the state could decide to do that, it
would put the project behind by a minimum of two and a half
years. There are no existing rights-of-way on the Richardson
Highway and no permits in place and, he advised, any information
otherwise is not true. This is not to say that other projects
are no good, it is to say that timeframes must be looked at.
2:07:16 PM
MR. FAUSKE, regarding Representative P. Wilson's question about
finance and bonding, explained why there is a problem. He said
it would be similar to a person going to the bank to borrow
money to buy a car and the banker assumes that the borrower will
be making the payment. But the borrower tells the banker that
another person will be deciding what the payment is going to be.
The banker will then ask why that other person is not there.
What is being looked at is that the bonds have been issued and
the investment bankers, engineers, and others have all been
dealt with so that the project pieces are in place. But at the
end of the day, there is an entity that can deregulate or do
something to the payment stream/cash flow stream on the tariffs
that have been established, and those tariffs would be
established by the legislature. He said AGDC's charts show that
the project is currently at front-end-loaded (FEL) 2. At FEL 3
the project would be down to a plus or minus success of 10
percent and that is when the legislature would sanction moving
forward. At that time, the legislature will have a very clear
idea of what the tariffs are going to be, what the debt service
requirements will be, and someone cannot be allowed to get in
between because that would create an impediment between the
investor and the investor's cash flows or line of sight.
Consumers would still be protected on the relationship between
them and their utility.
2:09:23 PM
MR. FAUSKE pointed out that for a $7.5 billion project, plus or
minus 30 percent, the tariffs coming into Anchorage and
Fairbanks would be about $9.63 and $10.45, respectively. That
would be at a 70:30 debt-equity ratio, which means that the
state would be an equity owner. He said he is saying own, not
operate, because House Bill 369 stipulates the lowest possible
cost to the Alaska consumer. The precedent agreements and firm
transportation commitments come into play as to what the
financing and cash flows are going to be and what the bond
rating will be. He advised that AGDC would come in at probably
AA+ or AAA depending on the project alignment, whereas most
builder/owner/operators would be BBB or BBB+. The difference in
what it costs those builders to raise their own capital has a
huge impact on what the tariff will be to the consumer. A 100
percent debt-equity ratio is a distinct possibility if the state
must go ahead alone because no producers or other interests have
stepped forward. However, the basic idea of getting gas to
Alaskan consumers is still being looked at; hopefully with a
commercial enterprise at the end of it. At a 100 percent debt-
equity financing, the aforementioned tariff rates would drop
about $1.20 to each of Anchorage and Fairbanks because of the
difference in the capital costs.
2:11:32 PM
CO-CHAIR SEATON understood Mr. Fauske to be saying that if there
were not firm transportation commitments the state could still
build a pipeline using its AAA or AA rating as the backup for
the debt.
MR. FAUSKE replied that he is not going to say that there will
not be firm commitments; he is saying that there might not be a
large commercial enterprise or that the state might have to be
its own equity owner and buy the gas. That is why bringing
ANGDA into the fold represents a significant piece for AGDC in
terms of gas marketing and the ability to purchase gas. The
hope is that there will be firm transportation commitments,
especially with the utilities.
2:12:28 PM
JOE DUBLER, Vice President, Alaska Gasline Development
Corporation (AGDC), Director of Finance, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), explained that
the credit can be based on just about anything. The market will
look at what is being offered and that will determine the cost.
The state could decide to backstop this entire transaction, but
that would be the call of the DOR commissioner, the governor,
and the legislature. That would be looking at a little over $5
billion in debt at a 70:30 debt-equity ratio for the State of
Alaska, which would be a very large amount of debt and could
impact the state's credit rating. Many people have said
definitively that it would, and this could impact political
subdivisions, the Alaska Industrial Development and Export
Authority (AIDEA), and AHFC. So the best route for a project
like this would be to rely on firm transportation commitments
because without those the state would have no idea about whether
there are people that want to buy the gas. The idea behind the
project that AGDC has presented is that it will hold an open
season and if the open season is successful and there are firm
transportation commitments for capacity in the line, then the
project gets sanctioned by the governor and the legislature and
the project moves ahead. The project would not move ahead if
there are no firm transportation commitments, unless the
policymakers decide at that time to build the project anyway.
2:13:58 PM
CO-CHAIR SEATON recalled that according to last week's hearings,
the highest value to Alaska was gas on the North Slope. For
example, he related, there are problems with TAPS needing heat
in places along the line and lowered volumes so that there needs
to be conversion to either methanol and gasoline or GTLs for
diluting the heavier oil. He inquired whether it is currently
known that the producers are going to commit to sell gas into a
pipeline.
MR. DUBLER responded that at the expression of interest meeting
held in May 2011, AGDC did receive interest from producers in
excess of the line capacity, although that interest is non-
binding.
2:15:23 PM
REPRESENTATIVE P. WILSON understood that the gas pipeline cannot
exceed 500 million cubic feet per day because it would violate
AGIA for the state to do so. She asked whether HB 9 would allow
the state to go around this provision of AGIA because it would
be forming its own entity.
MR. FAUSKE answered that he is not a lawyer, but that he thinks
the proposed legislation gives a great deal of leeway. He
reminded members that AGIA called for five take-off points.
Therefore, AGDC's work is not pointless if the big line goes
because it then becomes a spur line off the big line. Regarding
a bigger line, he said that compression can be added to get to
more maximum size and gaslines can be looped, but he does not
know that that is where things are at yet. The governor has
come out with the message that by third quarter 2012 he wants to
see some type of alignment. This message is encouraging because
if there is an alignment where gas is going to be delivered it
would hopefully have large commercial enterprise generating cash
back to the state and adequate gas supplies coming through the
Railbelt.
2:18:36 PM
MR. FAUSKE, continuing, said the sky would be the limit if there
is an alignment because once there is a pipeline with the
resource there will be all kinds of ideas, entrepreneurs, and
inventors. He said he is not advocating for the state to be
frivolous, but he is asking what the alternative is. For
example, AHFC alone has $2.5 billion in assets in the affected
area, and those would quickly become worthless if there is no
energy source.
MR. FAUSKE added that he remains hopeful for Cook Inlet because
people in Fairbanks are in the dire situation of paying more for
their monthly heating bill than for their mortgage payment. He
related that a fear of Fairbanks residents is that if something
big is hit in Cook Inlet then Fairbanks will be forgotten. He
said the response of AGDC has been that gas can flow north,
west, south, and east.
2:20:11 PM
MR. FAUSKE addressed Representative Kawasaki's question about
ANGDA, pointing out that a gas marketing arm will be needed if
the project proceeds. Therefore, AGDC recommended that ANGDA be
brought over with its enabling statutes and support, and that
ANGDA be utilized for one of the purposes for which it was
originally created.
CO-CHAIR SEATON inquired whether the assumption is that the
state would take gas in-kind instead of in-value.
MR. FAUSKE replied that it could. However, even if the state
was to go it alone and had to buy the gas to put into the line,
a marketing entity would still be needed and would therefore
need to be created in statute.
2:21:18 PM
CO-CHAIR SEATON maintained that a marketing entity would not be
needed if the state took gas in-value. He therefore presumed
that the assumption was to set up the procedure so the state
would be ready to either purchase gas to put into the pipeline
or to take royalty gas and sell it as gas to some entity.
MR. DUBLER responded that royalty in-kind would be one use of
the gas marketing entity that AGDC is trying to utilize through
ANGDA. The other use would be in a situation where customers at
the downstream end of the pipe do not want to deal directly with
the producers on the North Slope. In that case, a gas marketing
entity would be needed to provide a bridge between the North
Slope producers and the customers on the downstream side. He
explained that AGDC cannot own the pipeline and be the gas
marketing entity at the same time because those must be separate
entities. Therefore, the proposed legislation structures it the
same as the private sector - two corporations, two subsidiaries,
with common control and common board. He added that when AGDC
was researching statute for the language necessary for
marketing, it discovered that the statutes for ANGDA provided
the ability to do everything that needed to be done.
2:23:08 PM
CO-CHAIR FEIGE, regarding the 70:30 debt-equity ratio for
financing, presumed that the 30 percent equity share would not
necessarily come from the state as a whole, but whoever decides
to build the pipeline, although the state could certainly have
an ownership share in a pipeline of this type. With that in
mind, he asked what an appropriate share would be for the state
as far as minimum or maximum percentages of equity in the line.
MR. FAUSKE answered that it would come down to the negotiations
with some of the business partners. The hurdle rate across the
U.S. for these projects is generally around a 12 percent return
on equity. For example, if during negotiations a builder/owner/
operator says it wants the whole deal, there is some risk here
and it must be ensured that the operator does not get the 12
percent and leave all the risks sitting with the state. So
there is a trade-off and those are going to be the negotiations
during the selection of a builder/operator. The hope is to get
equity partners coming in. A year ago a producer [told AGDC]
that if any project goes forward it would like to have an equity
position at least equal to the amount of gas that it has flowing
down that pipe.
2:25:01 PM
CO-CHAIR FEIGE said one of the major hurdles to this line, as he
sees it, is that currently it has a capacity of 500 million
cubic feet a day, yet the major market in Anchorage consumes
roughly half that with existing production. By the time a line
gets built, production available in Cook Inlet may have
declined, but there would still be significant production coming
out of the inlet. However, with more exploration there could be
more production coming out of Cook Inlet. So, there is a
certain percentage of the Anchorage Bowl's consumption that will
already be taken care of, which leaves somewhere between 250
million and 500 million cubic feet in total demand that is not
spoken for. Short of displacing everything that currently
exists and all the jobs in Cook Inlet, there is a significant
quantity of gas that still has yet to find a customer. He asked
whether AGDC or AHFC is in a position to assist or encourage
industrial users to come to the state.
MR. FAUSKE replied that this concept has been developed on how
to monetize or sell the 500 million cubic feet. It is known
that local usage is 240 million cubic feet. Fairbanks is
essential to the tariffs that were quoted to the committee
earlier and that piece of business must be in there so that the
tariff model stays structured. He said AGDC is looking forward
to the open season when negotiations are started and interest is
shown. The beauty of a front-end-loaded system is that through
the stages of FEL 2 and FEL 3 it can be seen whether the project
will work. If there is no commercial interest, then the state
would be at another decision point; for example, whether to
downsize the line, subsidize the amount coming in, or import
LNG. He pointed out that AGDC has looked at whether [the
gasline] could beat imported LNG pricewise, because if it cannot
then there is no sense in proceeding. Imported LNG is currently
at $14-$16 per million British Thermal Units (BTUs) and, so far,
AGDC's estimates beat that by a fairly good margin.
2:29:22 PM
CO-CHAIR FEIGE inquired whether HB 9, Version U, gives AGDC
enough authority to help facilitate expanding the market before
getting too deep into FELs or the various stages of project
management.
MR. FAUSKE responded that it is good legislation because it
gives AGDC a great deal of authority without offending AGIA and
getting into a position of "us versus them", which he does not
think is appropriate in terms of moving forward. The proposed
bill would give AGDC a great deal of authority to continue doing
valuable work for the state to bring a product to the
legislature and the governor from which good, meaningful
decisions can be made. Progress is being made, he continued;
however, confidentiality agreements are needed. Information has
been exchanged over the past year, but AGDC has been stopped in
its tracks several times when requesting information. He said
he supports people on that because they are not going to turn
over corporate information if they know that it cannot be
protected. He said he thinks this legislation puts AGDC in the
right spot to continue moving forward. An outstanding job has
been done by the sponsors in researching and creating an entity
that will do for the state what needs to be done. Further
discussion will show that the provisions are not onerous and
have to be done to move forward.
2:31:44 PM
REPRESENTATIVE KAWASAKI observed from the ANGDA statute that
marketing is one of ten duties required of ANGDA. The others
are to: come up with plans to use the state's royalty gas for
in-state use, create a revenue sharing plan for local
governments, plan for delivery of natural gas to communities
along the pipeline route and to Southcentral Alaska through a
spur line, plan for delivery and pricing of liquefied natural
gas to the Yukon River and coastal communities, and plan to
maximize Alaska hire including project labor agreements. He
added that ANGDA was created by the voters in 2002 and put into
law by 2003 with the idea that this authority would be a public
corporation unto itself to get gas to the folks that need it.
The Alaska Stand Alone Gas Pipeline (ASAP) would miss Fairbanks
by about 50 miles, which he said causes concern. The proposed
bill would bring ANGDA under the AHFC board, essentially voiding
the current ANGDA board membership. He said he is therefore
cautious and questioned why AHFC is the appropriate organization
to get gas to customers in the state of Alaska.
MR. FAUSKE answered that he is not in the position to address or
explain why ANGDA did not get done the things it was allowed or
mandated to do. He said AGDC's recommendation was to save the
state some money by bringing in and utilizing an entity that had
the statutory guidelines to do the gas marketing. The intent
was to not re-invent the wheel. He said ANGDA could continue on
its separate mission while AGDC went another way, but that he
does not think that is what Representative Kawasaki is advising.
2:34:41 PM
MR. FAUSKE, regarding missing Fairbanks, said that the proposed
pipeline would come 37 miles into Fairbanks from Dunbar. No one
is missed, he asserted. He explained that enriched gas would
come off the 24-inch line at Dunbar. Because it is enriched
gas, a straddle plant would have to be built at a cost of $250
million to get down to utility-grade gas. Methane would run in
a 12-inch pipe to Fairbanks, which would be about three times
the current need of Fairbanks. He said he has listened to
people and understands their concern, but some of the changes
were $250-$300 million changes. For Anchorage the gas would
come 68 miles in an 18-inch pipe, so the main gasline does not
come into Anchorage either. The federal government and others
will have some say and restrictions as to where the 24-inch
buried pipeline can go, although the rationale for the distance
[from Fairbanks] was a cost benefit.
2:36:59 PM
REPRESENTATIVE KAWASAKI reiterated the portion of his question
about why AHFC is the appropriate organization in which to
market and monetize natural gas on the North Slope.
MR. FAUSKE allowed that he asked himself that question as well
and said that AHFC has a tremendous board. He explained that by
statute the AHFC board is composed of the commissioners from
Department of Revenue, Department of Commerce, Community &
Economic Development, and Department of Health and Social
Services, as well as four positions that represent real estate,
rural, energy, and finance. Those are broad titles that could
easily be equated to this type of project, he maintained, and
this has been discussed in reference to creating another entity
or expanding AGDC. He said he is very flattered that AHFC was
asked to take this on and he is satisfied with the work that has
been produced. Although he is not an engineer, he knows how to
manage people and has no doubt of AHFC's capabilities for
putting the finance piece of this together. Over the years AHFC
has built a reputation of taking on projects and getting them
done.
MR. DUBLER added that House Bill 369 was passed by both bodies
of the legislature and was signed by the governor, which is how
AHFC got involved in this process. It was not something that
AHFC was looking for.
2:39:29 PM
REPRESENTATIVE MUNOZ asked what would happen with the extra gas
if more gas is committed during the open season than the pipe
can accommodate; for example, could the pipeline be made bigger.
MR. DUBLER replied that under AGIA the pipeline is restricted to
half a billion cubic feet a day. If this problem were to occur,
AGDC would look to some of the larger shippers, probably the
anchor tenant, to throttle back to get under the AGIA limit.
2:40:19 PM
REPRESENTATIVE MUNOZ inquired what the timeline for completion
would be under AGDC's most optimistic scenario.
MR. FAUSKE responded that the first gas transmission would be
the fall of 2018, with full transmission in 2019. He reminded
members that history shows most projects get themselves into
trouble when trying to compress those schedules. While he knows
this [timeline] does not comfort the Fairbanks folks, there are
some ideas currently underway to mitigate some of the elements,
such as possibly trucking gas. Even if Cook Inlet was to come
online with a large field, processes such as permitting would
still take some time for getting that gas moved north.
2:42:09 PM
REPRESENTATIVE FOSTER asked how much the demand forecast for the
gasline would be affected if the Susitna-Watana hydroelectric
project is constructed.
MR. FAUSKE answered that AGDC has a chart showing completion of
the dam in about 12-15 years. There is a 60 kilowatt piece that
is based on increased population and time factors in the
Anchorage and Railbelt areas, he explained, so the two projects
complement each other and both are needed.
2:43:20 PM
CO-CHAIR SEATON understood that the proposed bill would set the
gasline as a contract carrier. However, he pointed out, the
state insisted that the AGIA gasline be common carrier open
access, which would incentivize other exploration on the North
Slope because people would have a mechanism for monetizing any
gas that is found. He inquired about getting the benefits of
that or whether it is just being said that this pipeline is
small enough that it will be tied up with one, two, or three
people under contract carrier and everybody else will be
excluded unless the contract carrier wants to sell the space.
MR. FAUSKE replied that AGDC has deliberated a great deal on
contract versus common carrier and it goes back to financing.
He said AGIA was a different animal and an open basis was wanted
because of the size of the pipe and to welcome in explorers. At
500 million [cubic] feet a day, he continued, a person would
like to think that people will be out exploring and the line
will be maxed out quickly. However, it gets back to the
financing and wanting long-term, 20-year contracts with shippers
that match the cash flows off the gasline's 20-year debt
service. These long-term contracts are binding contracts and
the trouble with going to common carrier status is that several
years down the road someone else could want in on the pipe and
then the amount of gas allowed for the guy under contract is
reduced because the pipe capacity is only so much. He said AGDC
has met with Anadarko Petroleum Corporation and Doyon, Limited,
on this issue and there are provisions down the road where
compression or looping could be added because at its current
status this line could technically go up to a billion [cubic]
feet of gas a day, and it seems to have satisfied some people.
Going to a common carrier would make it almost impossible for
AGDC to get financing for the project, he advised, because there
would be no guarantees that these contracts in place would be
there to service the debt.
2:46:01 PM
CO-CHAIR SEATON asked whether it makes more sense for the
gasline to be a contract carrier with firm transportation
commitments that tie up all the capacity or to have revenue
bonds that are pledged and paid back over time like what was
done for the road to Red Dog Mine.
MR. FAUSKE answered that this project would all be based on
revenue bonds, and AGDC has advocated for about $5-$5.5 billion
in revenue bonds to fund this project. The proposed bill points
out that these would be debt obligations of AGDC, not of the
state and not of AHFC, so that the credit of the state and of
AHFC is not harmed. It will be up to AGDC to create a product
that will generate the interest in the marketplace to buy the
bonds, and getting those investors would be based on these long-
term transportation commitments and the dynamics of the project.
MR. FAUSKE added that AGDC is in the process of exploring the
agreement that was done under the Alaska Railroad Transfer Act
where the railroad had the ability to sell tax-exempt debt in
almost unlimited capacity. Since tax-exempt debt in the US is
controlled by the Internal Revenue Service, AGDC will do a
private letter ruling before it launches because it needs to be
in place that that will be allowed. It would have a significant
impact on the cost of capital and, if allowed, would be another
piece that can be utilized.
2:47:52 PM
CO-CHAIR SEATON noted that the Legislative Budget and Audit
Committee brought up Pedro van Meurs to provide a presentation
and analysis of the economics of a half billion cubic foot per
day pipeline and a 1.5 billion cubic foot per day pipeline. He
requested that AGDC provide the committee with a response to
that analysis, preferably by 2/8/12.
CO-CHAIR SEATON moved to discussion of the sectional analysis on
HB 9, Version U. He explained that committee members will ask
questions as the analysis is reviewed, but that answers to those
questions will be provided at the next bill hearing by the
sponsors or AGDC.
2:50:04 PM
TOM WRIGHT, Staff, Representative Mike Chenault, Alaska State
Legislature, on behalf of the prime sponsor, Representative
Chenault, paraphrased from the sectional analysis on Section 1,
written as follows [original punctuation provided]:
Adds a new section to AS 18.56, Alaska Housing Finance
Corporation. The new section adds powers to AGDC that
are specific to AGDC's purpose of planning and
developing an in-state natural gas pipeline. Those
added powers would include the power to: (1)
determine the ownership and operating structure and
enter into agreements relating to ownership and
operation; (2) exercise eminent domain; (3) acquire
property and rights necessary or convenient for owning
or operating the pipeline; and (4) dispose of the
pipeline project or other assets.
This bill section would also (a) add powers to enable
AGDC to issue bonds without limitation to further its
purposes; (b) add language to protect the State, the
various subdivisions of the State, and AHFC from any
liability for the actions of AGDC; and (c) establish
an "in-state natural gas pipeline fund" where money
can be appropriated and used for AGDC's purposes.
MR. WRIGHT noted that the aforementioned is HB 203, passed by
the House and now in the Senate Finance Committee.
CO-CHAIR SEATON inquired whether this is the section where it is
the debt of AGDC.
MR. WRIGHT replied yes, that is where the liability clause
occurs.
2:51:35 PM
MR. WRIGHT moved to Section 2, explaining that it would exempt
contracts by ANGDA from the provisions of the procurement code,
AS 36.30. He pointed out that AGDC is already exempt from the
procurement code under the provisions of House Bill 369.
REPRESENTATIVE KAWASAKI asked when the planning and development
of a project would come before the legislature. He also asked
what new broad powers the AGDC would have over eminent domain.
MR. WRIGHT deferred to AGDC on this question, but said that AGDC
has eminent domain powers just like those had by other state
corporations. He added that he thinks eminent domain was also
provided to the Alaska Gasline Inducement Act (AGIA).
CO-CHAIR SEATON reiterated that the questions are just being put
on the record for answering at the next hearing.
2:53:53 PM
MR. WRIGHT returned to the sectional analysis, saying that
Section 3 would replace the Joint In-State Gasline Development
Team with the Alaska Gasline Development Corporation (AGDC) and
Section 30 would repeal the in-state team. Section 4 would
replace the executive director of AHFC as the chair of the Joint
In-State Gasline Development Team and Section 30 [would repeal
the in-state team].
REPRESENTATIVE GARDNER, referring to Version U, Section 4, page
4, lines 24-25, asked whether deleting the language pertaining
to avoiding duplicating studies that have already been produced
or otherwise obtained by other state entities would create a
problem about ownership of the studies.
2:54:37 PM
MR. WRIGHT paraphrased from the sectional analysis for Section
5, written as follows [original punctuation provided]:
Amends AS 38.34.050(c), Cooperation and access to
information. Replaces the reference to AHFC with a
reference to AGDC. This section of law currently
directs the Department of Natural Resources to grant a
right-of-way lease under AS 38.35 for the gas pipeline
transportation corridor. The amendment, besides
transferring the right from AHFC to AGDC, would
specify that the lease is to be given at no cost or
rental fee and that the lease is not subject to the
lease requirements contained in AS 38.35.120(a)(1),
(2), (5), and (7). These paragraphs of current law
would require that AGDC operate the pipeline as a
common carrier and that it be subject to regulation by
the Regulatory Commission of Alaska. With this
change, these paragraphs of current law would not
apply to AGDC's lease.
CO-CHAIR SEATON inquired whether the provision for no cost or
rental fee would require a Department of Natural Resources
fiscal note.
2:55:57 PM
MR. WRIGHT continued paraphrasing from the sectional analysis,
moving on to Section 6, written as follows [original punctuation
provided]:
Adds new subsections to AS 38.34.050, Cooperation and
access to information. The new subsections would:
(a) give AGDC the ability to enter into
confidentiality agreements and keep information
confidential and not subject to disclosure under the
Public Records Act (AS 40.25); and (b) direct state
agencies to provide to AGDC water, sand, gravel, and
other necessary natural resources and to enter into
leasehold agreements and issue permits as necessary or
appropriate for AGDC's pipeline, with the costs of the
foregoing being borne by the applicable state agency.
MR. WRIGHT noted that the sponsor is working with AGDC and the
administration on an amendment that would somewhat modify
Section 6; the hope is to have it ready for the next hearing.
REPRESENTATIVE GARDNER inquired whether the proposed new
subsection (e) to AS 38.34.050 [Version U, page 5, lines 10-21]
is the same kind of confidentiality provisions that are seen
under AGIA. Regarding the proposed new subsection (f) to AS
38.34.050 [Version U, page 5, lines 22-31], she understood that
if AGIA fails the state would own, because of its financial
participation, the field study data, route study data, and such.
She asked whether that would be the same here.
2:57:29 PM
CO-CHAIR FEIGE related that an accomplishment by ANGDA was
portions of a right-of-way between Glennallen and Palmer. He
asked whether that right-of-way would be transferred to AGDC.
MR. FAUSKE responded that [such a right-of-way] does not exist.
2:58:10 PM
MR. WRIGHT resumed his review of the sectional analysis, stating
that Section 7 would repeal and re-enact AS 38.34.099, which is
definitions. He said Section 7 would broaden the definitions of
the AGDC and the in-state natural gasline to conform to changes
in Sections 3, 4, and 5. Section 8 is conforming language for
conditional leases and those changes are found in Section 5.
Section 9 is also conforming language for noncompetitive leases
to note the changes found Section 5.
2:58:44 PM
REPRESENTATIVE GARDNER returned to the proposed new subsection
(g) to AS 38.34.050 [Version U, page 6, lines 1-11], which would
provide water, sand, gravel, and other resources at no charge.
She said that if gas was sold out of state from this line it
would subsidize out of state users, and she would like to know
the impact on local governments, if there is any.
2:59:28 PM
MR. WRIGHT continued the sectional analysis, noting that Section
10 is conforming language for right-of-way leases to note the
changes found in Section 5. He said Section 11 would add a new
subsection to AS 38.35.140 that a right-of-way lease to AGDC
shall be granted without cost or reimbursement. He pointed out
that Section 12 is a bill passed by the [House of
Representatives] last session, HB 215, and paraphrased from the
sectional analysis, written as follows [original punctuation
provided]:
Amends AS 38.35.200(a), Judicial review of decisions
of commissioner on application. Adds language that is
intended to limit the ability of those with objections
to natural gas pipeline construction to stop necessary
projects. Allows a competing applicant or a person
with a direct financial interest affected by the lease
right-of-way to raise an objection within 60 days of
the application or 60 days after the effective date of
this legislation. Allows an applicant standing to
seek judicial review anytime in the process.
MR. WRIGHT added that Section 12 would also exempt the
Department of Environmental Conservation, Division of Air
Quality, from this judicial review.
CO-CHAIR SEATON, regarding Section 11 and the provision that
would allow the right-of-way lease to AGDC without cost or
reimbursement, asked what would be the fiscal impact of that to
the reviewing agencies.
MR. WRIGHT said that would be more in the fiscal note.
REPRESENTATIVE GARDNER asked how the 60 day timeline [Section
12] compares to existing timelines.
3:01:11 PM
MR. WRIGHT addressed Section 13 of the sectional analysis,
stating that this section is also part of HB 215. He
paraphrased from the analysis, written as follows [original
punctuation provided]:
Adds a new subsection to AS 38.35.200, Judicial review
of decisions of commissioner on application. This
subsection (c) is modeled after the Trans-Alaska
Pipeline Authorization Act provision to foreclose
lawsuits against any phase of development and/or
construction. This subsection only allows those who
have standing to bring about an action alleging that
an action will deny rights under the state
Constitution or challenging the invalidity of this
section. The complaint must be filed in a state
Superior court and the court may not grant injunctive
relief with the exception of a final judgment.
Exempts an appeal of a permitting decision by the
Department of Environmental Conservation under AS
46.03 (Environmental Conservation) and AS 46.14 (Air
Quality Control) that is delegated to the department
by the Environmental Protection Agency.
3:01:54 PM
MR. WRIGHT continued paraphrasing from the sectional analysis
regarding Sections 14-28, written as follows [original
punctuation provided]:
Section 14: Amends AS 40.25.120(a), Public records;
exceptions, certified copies. Allows AGDC and the
provider or recipient of the information to enter into
confidentiality agreements that would not be subject
to public disclosure. This provision complements the
language found in Section 6.
Section 15: Amends AS 41.41.010(a), Establishment of
the authority. Deletes certain provisions relating to
ANGDA pertaining to the construction of a natural gas
pipeline. The overall effect of the amendments in
this and later bill sections would be to clarify that
ANGDA may operate as a shipper of gas but not as a
pipeline owner or developer. This clarifies the
respective responsibilities of AGDC and ANGDA and
conforms to general requirements of FERC [Federal
Energy Regulatory Commission] and other potential
pipeline regulatory agencies.
3:02:38 PM
Section 16: Amends AS 41.41.010(d), Establishment of
the authority. Conforming language to that found in
Section 14, allowing ANGDA to focus more on marketing.
Section 17: Adds a new subsection to AS 41.41.010,
Establishment of the authority. Gives the ANGDA the
ability to pledge royalty gas owned by the state as
long as the royalty gas is not already committed by
contract to other purchasers of royalty gas.
Section 18: Repeals and re-enacts AS 41.41.020,
Authority governing body. Establishes the board of
directors of AHFC as the governing body of ANGDA.
Section 19: Amends AS 41.41.060, Compensation of
board members; per diem and travel expenses. This
section references statutes granting The Alaska
Housing Finance Corporation board reimbursement for
compensation, travel and per diem. This change also
allows the Alaska Housing Finance Corporation board
members to receive compensation, travel and per diem
while on official business on behalf of ANGDA.
3:03:42 PM
Section 20: Amends AS 41.41.070(d), Authority of
staff. Exempts from the procurement code persons
found by ANGDA to be necessary for the purpose of
developing information, furnishing advice or
conducting studies, investigations, hearings or other
proceedings.
Section 21: Amends AS 41.41.090(b), Conflicts of
interest. Deletes the reference to a "project" in
conformance with the idea that ANGDA will not be a
pipeline owner or operator, as discussed above in
Section 15.
Section 22: Amends AS 41.41.150(a), Public access to
information. Exempts information contained or subject
to a confidentiality agreement between ANGDA and the
Alaska Gasline Development Corporation. This conforms
to changes made in sections 6 and 14.
Section 23: Amends AS 41.41.200. Powers of the
authority. Deletes references to a project. this
conforms to the change discussed in section 15.
Section 24: Amends AS 41.41.990(2), Definitions.
Amends the definition of the ANGDA Board of Directors
to allow the Alaska Housing Finance Corporation Board
of Directors to act as the board of ANGDA.
3:04:37 PM
Section 25: Amends AS 42.05.431(c), Power of
commission to fix rates. Exempts from review by the
Regulatory Commission of Alaska any agreement or
amendment to an agreement entered into by AGDC with a
public utility. The exemption would continue for as
long as any debt is outstanding for the AGDC pipeline.
Section 26: Amends AS 42.05.431(e), Power of
commission to fix rates. Makes a conforming drafting
change to reflect the change proposed in section 25.
Section 27: Adds a new subsection to AS 42.05.711,
Exemptions. Exempts AGDC from oversight by the
Regulatory Commission of Alaska until such a time that
all debt has been paid on a project.
Section 28: Adds a new section to AS 42.06, Article
7, Pipeline Act. Exempts AGDC and any pipeline
developed, owned, or operated, in whole or in part, by
AGDC from the Pipeline Act, which, generally speaking,
places pipelines and pipeline carriers in Alaska under
the regulations of the Regulatory Commission of
Alaska.
CO-CHAIR SEATON requested that the exemption in Section 25 be
addressed at the next hearing on HB 9.
3:05:48 PM
MR. WRIGHT resumed the sectional analysis, paraphrasing from
Section 29, written as follows [original punctuation provided]:
Adds a new subsection to AS 43.56.020, Exemptions.
Taxable property of a natural gas pipeline developed
by the Alaska Gasline Development Corporation is
exempt from state or local taxes until the first
natural gas flows in the project generating revenue to
the owners of the natural gas pipeline project.
CO-CHAIR SEATON inquired about the effects on municipalities and
the liabilities that will occur on municipalities during the
construction phase.
MR. WRIGHT replied that this is being discussed by the sponsors,
although there is not an amendment.
3:06:39 PM
MR. WRIGHT returned to the sectional analysis, paraphrasing from
Section 30, written as follows [original punctuation provided]:
Repeals AS 38.34.030, Joint In-State Gasline
Development Team; AS 38.34.040, Duties of the
development team; AS 38.34.060: Conflicts of
interest; AS 41.41.030, Term of office; AS 41.41.040,
Removal and vacancies; and AS 41.41.080, Legal
counsel. The provisions repealed in the AS 38.34
statutes are the Joint In-State Gasline Development
Team, their duties, conflicts of interest provisions.
The In-State Team has fulfilled its duties and the
function they served is no longer necessary with the
advent of AGDC.
The AS 41.41 statutes refer to the board members of
ANGDA. These provisions are no longer necessary since
the Alaska Housing Finance Corporation board is
overseeing activities of ANGDA.
3:07:33 PM
MR. WRIGHT explained that Section 31 would repeal Section 1
of Ballot Measure No. 3, the initiative that enacted ANGDA.
He said the sponsors feel that the ballot initiative
findings would no longer be necessary and would no longer
pertain to what ANGDA's mission would be under the proposed
HB 9. He concluded by relating that "Section 32 contains
certain instructions to the revisor of statutes and Section
33 is an immediate effective date."
3:08:04 PM
[HB 9 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 9 Version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM HRES 2/27/2012 1:00:00 PM |
HB 9 |
| HB 9 Sectional, version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM HRES 2/27/2012 1:00:00 PM |
HB 9 |
| HB 9 Sponsor Statement- version U.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| Amendment1-RES.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| Amendment 2-RES.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| HB 9.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| HB 9 Fact Sheet.docx |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM HRES 2/24/2012 1:00:00 PM |
HB 9 |
| AGDC Legislative Recommendations.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |
| 2002 Ballot Measure 3, Section 1.docx |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM |
HB 9 |
| HB 369.pdf |
HRES 2/6/2012 1:00:00 PM HRES 2/8/2012 1:00:00 PM HRES 2/10/2012 1:00:00 PM |
HB 9 |