Legislature(2015 - 2016)BILL RAY CENTER 208
06/01/2016 11:00 AM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB246 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 246 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 246-AIDEA: FUNDS; LOANS; PROGRAMS; DIVIDEND
11:09:21 AM
CO-CHAIR TALERICO announced that the only order of business is
HOUSE BILL NO. 246, "An Act creating the oil and gas
infrastructure development program and the oil and gas
infrastructure development fund in the Alaska Industrial
Development and Export Authority; relating to the interest rates
of the Alaska Industrial Development and Export Authority;
relating to the sustainable energy transmission and supply
development and Arctic infrastructure development programs of
the Alaska Industrial Development and Export Authority; relating
to dividends from the Alaska Industrial Development and Export
Authority; and adding definitions for 'oil and gas development
infrastructure' and 'proven reserves.'"
11:10:18 AM
GENE THERRIAULT, Energy Policy and Outreach Director, Alaska
Energy Authority (AEA), Alaska Industrial Development and Export
Authority (AIDEA), Department of Commerce, Community & Economic
Development (DCCED), related that the administration would not
be opposing any of the amendments that will be offered today to
HB 246. The administration is supportive of the committee
reporting the bill and understands from the committee aide that
there will likely be some stylistic changes as a committee
substitute (CS) is produced. This will be the first CS of the
bill and since it was legislation from the governor drafted by
the Department of Law (DOL), he understands that quite often the
drafters at Legislative Legal and Research Services in order to
conform things to the legislative style make some changes and
the administration anticipates that this will not be anything of
substance.
11:11:23 AM
CO-CHAIR TALERICO inquired whether committee members have any
questions before beginning the amendment process.
REPRESENTATIVE JOSEPHSON, regarding the aforementioned statement
that the administration is broadly receptive to the amendments,
asked whether the administration has any concern with any single
amendment.
MR. THERRIAULT replied that the Alaska Industrial Development
and Export Authority (AIDEA) tries to be very protective of its
latitude, its authority, but understands it is the legislature's
prerogative to put limitations on the entity as the legislature
creates tools for the entity to use. A number of the amendments
[that will be offered] would put on some sideboards and AIDEA's
default preference would be that it be left to AIDEA's board of
directors to make class for the entity.
11:13:06 AM
REPRESENTATIVE HERRON moved to adopt Amendment 1, labeled 29-
GH2613\A.1, Shutts, 5/28/16, which read:
Page 6, lines 26 - 28:
Delete ", money or other assets transferred to
the fund by a majority vote of the members of the
authority under AS 44.88.050 from any other fund
controlled by the authority,"
REPRESENTATIVE TARR objected.
REPRESENTATIVE HERRON explained Amendment 1 addresses a concern
raised at the committee's last meeting. The amendment language
was suggested by Mr. Therriault and that is why he is proposing
and supporting Amendment 1.
11:13:38 AM
REPRESENTATIVE SEATON inquired whether removing this language
would create a problem for conduit financing, such as blocking
any fees from being established or that come through conduit
financing from being deposited into this fund.
MR. THERRIAULT responded that when he asked AIDEA's executive
director about this concern, Mr. Springsteen indicated that
passage of Amendment 1 would not preclude the conduit financing.
If that activity were to go on, those fees would be able to come
into the entity without being impaired. Responding further to
Representative Seaton, he confirmed that the amendment would not
impact the fees or the ability of AIDEA to do conduit financing.
11:14:54 AM
REPRESENTATIVE TARR requested examples of the type of transfer
that would occur if this language were left in the bill.
MR. THERRIAULT answered that to his knowledge the AIDEA board
has not transferred money between the funds. He recalled Mr.
Springsteen as having said that the transfer of funds from the
revolving loan fund is precluded and deferred to Mr. Springsteen
to answer the question further.
JOHN SPRINGSTEEN, Executive Director, Alaska Industrial
Development and Export Authority (AIDEA), Department of
Commerce, Community & Economic Development (DCCED), replied that
[retaining] this language would vulcanize the fund, so there
would not be the ability to move in or out other funds within
AIDEA. The sustainable energy transmission and supply (SETS)
development fund and the Arctic infrastructure fund are unfunded
and there has not been activity by the AIDEA board to move in
between the separate funds. He offered his understanding that
the revolving [loan] fund is precluded from transferring funds
outside of the revolving fund.
REPRESENTATIVE TARR understood that the [SETS and Arctic
infrastructure] funds have not been capitalized and surmised
that the proposed oil and gas infrastructure development fund
would not be capitalized unless there is some appropriation that
goes to it. She further understood that the 14 percent portion
of the revolving loan fund that is already in oil and gas
infrastructure loans would stay in the revolving loan fund
through the life of each particular loan, and these loans would
not ever be transferred into the new fund that would be created
under HB 246.
MR. SPRINGSTEEN responded correct.
11:17:02 AM
REPRESENTATIVE JOSEPHSON understood that deleting this language
would not have any net effect on AIDEA's operation as a
practical matter in terms of AIDEA's operation, the flexibility
with which it makes its investment decisions.
MR. SPRINGSTEEN answered, "As of today, no."
11:17:35 AM
REPRESENTATIVE SEATON stated that he understood the purpose for
establishing the oil and gas infrastructure development fund to
be so AIDEA does not become over-weighted in one sector within
the revolving loan fund. He requested Mr. Springsteen to
provide an example of where AIDEA would use the ability to
transfer between funds. He surmised that if AIDEA cannot take
money out of the revolving loan fund to capitalize any of the
other funds, then the only direction possible is to take money
out of the [proposed] fund to capitalize another fund or take
money out of the Arctic infrastructure fund to capitalize the
proposed fund. He asked if that would change the sector mix
that has been established by setting these separate funds to be
sector specific.
MR. SPRINGSTEEN agreed with Representative Seaton that the
amendment would isolate this fund as solely for oil and gas
infrastructure development and funds could not be moved between
the Arctic infrastructure, SETS, and oil and gas infrastructure
development programs.
11:19:09 AM
REPRESENTATIVE TARR surmised that given this language was in the
bill originally, there must have been some thinking that this
could be a tool at some point in the future. She asked whether
something could start out in the Arctic infrastructure fund, for
example, but then later becomes more clearly an oil and gas
infrastructure project where AIDEA might transfer it and that
would open up opportunity in the Arctic infrastructure fund.
MR. SPRINGSTEEN responded it goes to flexibility within the
funds, or lack of, and who makes the decision. If down the road
there were appropriations into the SETS, Arctic infrastructure,
and oil and gas infrastructure development funds, would that
decision to move funds rest more on the legislature? This would
clearly put it at the discretion of the legislature, and it
would be necessary to come back and ask for an appropriation to
"move those between the different funds."
11:20:36 AM
REPRESENTATIVE TARR removed her objection to Amendment 1. There
being no further objection, Amendment 1 was adopted.
11:20:57 AM
REPRESENTATIVE CHENAULT moved to adopt Amendment 2, labeled 29-
GH2613\A.12, Shutts, 5/30/16, which read:
Page 7, line 24:
Delete "engineer or other technical expert, as
the authority determines is"
Insert "attorney, bond counsel, engineer, or
other technical expert"
Page 7, lines 26 - 28:
Delete "(5) with the approval of the attorney
general, contract for the services of an attorney or
bond counsel as the authority determines is necessary
to fulfill the purposes of the program"
Renumber the following paragraph accordingly.
REPRESENTATIVE TARR objected for discussion purposes.
REPRESENTATIVE CHENAULT explained Amendment 2 attempts to mirror
existing language in the SETS and other funds. Noting the AIDEA
board has made those decisions since it was initiated, he said
he has concerns with the provision that the board must go
through an attorney general to contract for services of another
attorney or bond counsel. Amendment 2 would eliminate one more
piece of the pie where someone other than AIDEA may have control
over the projects that AIDEA is working on. Requiring the
attorney general to approve contracts is an unnecessary step.
11:22:20 AM
The committee took a brief at-ease.
11:23:18 AM
REPRESENTATIVE SEATON observed Amendment 2 proposes to delete
the language "as the authority determines is necessary". He
said he wants to be clear that this is just cleanup language and
would not change who is determining - the [AIDEA] board would
still be in charge of making that decision.
REPRESENTATIVE CHENAULT answered that the intent is for the
[AIDEA] board to be able to make those decisions on its own.
11:24:21 AM
REPRESENTATIVE JOSEPHSON asked whether AIDEA currently needs the
approval of the attorney general to contract for services of an
attorney.
FRED PARADY, Deputy Commissioner, Office of the Commissioner,
Department of Commerce, Community & Economic Development
(DCCED), replied no.
MR. SPRINGSTEEN suggested that Mr. Jerry Juday be allowed to
answer the question.
JERRY JUDAY, Senior Assistant Attorney General, Labor and State
Affairs Section, Civil Division (Anchorage), Department of Law
(DOL), noted that he is representing AIDEA.
REPRESENTATIVE JOSEPHSON asked whether, since its inception, the
AIDEA board simply has a motion where the board approves the
hiring of counsel when counsel is needed.
MR. JUDAY replied that currently AIDEA does hire outside counsel
through the Department of Law, and this is how it has worked
since AIDEA was established. He stated that Amendment 2 would
match language to what is in the SETS bill and, he believes, the
Arctic infrastructure bill. If he understands the intent of the
amendment, the expectation is to give flexibility potentially to
the board to not go to the Department of Law if the board chose
to make its own selection.
11:26:17 AM
REPRESENTATIVE TARR understood that under Amendment 2, paragraph
(4) [on page 7 of the bill] would deal with the different types
of professional advisors that might be necessary, and paragraph
(5) would say that it would not be necessary to have the
approval of the attorney general for those same services.
REPRESENTATIVE CHENAULT responded correct.
11:27:01 AM
REPRESENTATIVE TARR removed her objection to Amendment 2. There
being no further objection, Amendment 2 was adopted.
11:27:16 AM
REPRESENTATIVE SEATON moved to adopt Amendment 3, labeled 29-
GH2613\A.10, Shutts, 5/28/16, which read:
Page 8, line 11, following "than":
Insert "(A)"
Page 8, line 12, following "or":
Insert a new subparagraph to read:
"(B) $100,000,000; or"
CO-CHAIR TALERICO objected for discussion purposes.
REPRESENTATIVE SEATON explained Amendment 3 would place an upper
limit on how much financing AIDEA can provide a single project
before AIDEA is required to come to the legislature for
approval. He noted that current language in the bill would
require legislative approval for loan guarantees [exceeding] $25
million, but there would be no limit on the amount of a direct
loan that AIDEA could give before legislative approval was
required. He posited that since the bill is setting up a fund
and a process and would set limits on loan guarantees, then
there should be something similar for direct loans.
REPRESENTATIVE SEATON inquired whether there is any interaction
between loan guarantees and full financing.
MR. TERRIAULT answered that yesterday AIDEA representatives met
with Mr. Deven Mitchell [state investment officer, Department of
Revenue], who indicated there is no link between the loan
guarantee and the maximum dollar amount for the loans. "There
had been the suggestion that the loan guarantees are limited to
like a 10 percent or there was some kind of a ratio," he
continued, "but Mr. Mitchell said there really isn't." As the
bill is currently written, AIDEA could participate in lending on
a project, but could not go over 50 percent of the total cost of
the project. Amendment 3 would provide a hard dollar upper
ceiling and if AIDEA wanted to engage in financing beyond that
it would have to get prior legislative approval.
REPRESENTATIVE SEATON clarified Amendment 3 would allow AIDEA to
loan up to 50 percent of a $200 million project or 25 percent of
a $400 million project. It would limit the exposure of AIDEA as
a dollar amount without legislative approval; AIDEA could not
exceed the 50 percent cap, but it could be less than the 50
percent cap.
MR. THERRIAULT confirmed the aforementioned is correct; at 50
percent AIDEA's participation could be $100 million for a $200
million project. He added that the loan guarantee is a separate
hard dollar limit of $25 million, and if AIDEA wanted to do a
loan guarantee beyond $25 million it would have to get prior
legislative approval.
REPRESENTATIVE SEATON pointed out that if AIDEA were to do a 25
percent loan, not a 50 percent loan, it could participate on a
$400 million project by loaning $100 million.
MR. THERRIAULT confirmed that this is right.
11:31:08 AM
REPRESENTATIVE HERRON noted he is not opposed to the amendment,
but asked why $100 million.
REPRESENTATIVE SEATON responded that the purpose of HB 246 is to
provide AIDEA the ability to loan to oil and gas infrastructure.
If legislators are trying to limit the exposure of the state
without legislative approval, then it seems to him that limiting
loan guarantees to $25 million conflicts with there not being a
limit on the amount of a direct loan that AIDEA could bond for.
He said $100 million seems a reasonable figure for a limit
without legislative approval.
REPRESENTATIVE HERRON stated he thinks it important to have this
on the record because there could be in the future a legislature
that says $100 million is too high or vice versa. He posited
that $100 million is a benchmark that the committee is not sure
is the right number.
REPRESENTATIVE SEATON responded correct, it is a benchmark to
establish where legislative approval would come in and it could
always be modified by a future legislature.
11:33:12 AM
CO-CHAIR TALERICO asked whether Mr. Parady or Mr. Therriault has
any opposition to Amendment 3.
MR. THERRIAULT noted the maker of the amendment considered a
variety of dollar amounts and AIDEA suggested he be as generous
as possible given the cost of oil and gas infrastructure.
Therefore, AIDEA appreciates the decision for a higher number.
11:33:40 AM
CO-CHAIR TALERICO removed his objection to Amendment 3. There
being no further objection, Amendment 3 was adopted.
11:33:58 AM
REPRESENTATIVE SEATON moved to adopt Amendment 4, labeled 29-
GH2613\A.3, Shutts, 5/29/16, which read:
Page 8, lines 15 - 22:
Delete all material and insert:
"(b) The authority may not provide financing for
an oil and gas infrastructure development unless all
participants in the oil and gas field covenant with
the authority that
(1) the authority will not be responsible
for costs incurred in connection with dismantlement,
removal, or remediation of the oil and gas
infrastructure development; and
(2) after the date of the authority's
financing commitment, the participants will not take,
apply for, or accept a tax credit for expenditures on
the oil and gas field under AS 43.20.043,
AS 43.55.023, or 43.55.025."
CO-CHAIR TALERICO objected for discussion purposes.
REPRESENTATIVE SEATON explained Amendment 4 would provide
language to clarify and ensure that AIDEA cannot be held
responsible for dismantlement, removal, or remediation costs of
oil and gas development projects.
11:34:43 AM
CO-CHAIR TALERICO requested Mr. Parady or Mr. Therriault to
comment on Amendment 4.
MR. THERRIAULT answered that he talked with Mr. Springsteen and
it would not be AIDEA's intent to step in the line of that
responsibility. The amendment makes it clear that AIDEA needs
to really nail that down before the lending takes place.
11:35:08 AM
REPRESENTATIVE OLSON inquired whether this would also include
platform abandonment.
REPRESENTATIVE SEATON replied that if the state does not protect
itself on the far end of projects it could be looking at a huge
liability that it did not realize it was getting into. The
amendment would include [platform] abandonment as well, he said.
11:35:48 AM
CO-CHAIR TALERICO removed his objection to Amendment 4. There
being no further objection, Amendment 4 was adopted.
11:36:00 AM
REPRESENTATIVE SEATON moved to adopt Amendment 5, labeled 29-
GH2613\A.16, Shutts, 5/31/16, which read:
Page 8, following line 24:
Insert a new subsection to read:
"(d) The authority may not provide financing
under AS 44.88.880 if the loan-to-value ratio at the
time of financing exceeds 75 percent; the value of
proven reserves that are included in the value must be
calculated using the lesser of
(1) the average price of oil or gas
actually paid during the 12-month period immediately
preceding the time of financing, reduced by 10
percent; or
(2) the price of oil or gas forecast by the
Department of Revenue for the 12-month period
immediately following the time of financing, reduced
by 10 percent."
REPRESENTATIVE TARR objected.
REPRESENTATIVE SEATON explained Amendment 5 would make it clear
that the language will limit loan financing to loan to value
ratio not to exceed 75 percent; the collateral value must exceed
the loan and the loan cannot be for more than 75 percent of the
value. The way it was written previously, it would be 75
percent or greater, and though it has been interpreted some
other ways, that the language actually was backwards and so the
amendment clarifies that it cannot exceed that value ratio.
11:37:15 AM
CO-CHAIR TALERICO understood that Mr. Parady and Mr. Therriault
had other language and inquired as to how Amendment 5 fits in.
MR. THERRIAULT responded that AIDEA worked with the maker of the
amendment after hearing back from the Department of Law as to
whether it should be greater than or less than. According to
Wikipedia's definition of the loan to value ratio, the higher
that ratio the riskier the loan. He said AIDEA is trying to
establish a mechanism that is cautious for the entities involved
in this type of financing and AIDEA believes this language
achieves that.
11:38:04 AM
REPRESENTATIVE SEATON said the other portion of that was to
include some language that Representative Hawker had brought up,
which was to ensure that on reserves it was not only the
existing price of the last year, but if the price is predicted
to be dropping that AIDEA would not be valuing it on higher than
the predicted price and reduced by 10 percent in both cases.
The amendment would reduce the price by 10 percent and the
objective is to ensure that the value is 10 percent less.
Representative Seaton said he wants to ensure that including
that calculation to limit the estimation of price by 10 percent
will include the total value of the project and that that is the
way that AIDEA would work its calculations.
MR. THERRIAULT pointed out that the language in paragraphs (1)
and (2) of Amendment 5 came from discussions AIDEA had with
another member of the committee and the attempt was to be
conservative. If reserves are to be counted as part of the
collateral, AIDEA wants to err on the side of caution in how it
values those reserves and this language does that. He said
AIDEA suggested it would be best to preserve a little bit of
latitude here for AIDEA to flesh this out in the process of
regulations, because in valuing the resources there must be
subtraction of the lifting cost and depending on where the
production is located there may be treatment cost associated
with transportation to market. The risk of trying to put a list
into statute is not putting something on the list and through
regulation AIDEA would come up with a process that ensures AIDEA
accounts for all of those costs so that if reserves are used as
part of the collateral AIDEA will err on the side of caution.
REPRESENTATIVE SEATON stated the aforementioned is what was
needed on the record. It is not just the price of oil times the
estimated reserve, but is actually the value for that particular
project and not broadly true an entire company.
11:41:15 AM
REPRESENTATIVE TARR recalled that the committee spent some time
in its previous meeting discussing how to perhaps better define
the proven reserves portion of this. She said she is trying to
confirm there is not language elsewhere that needs to be
adjusted. She observed that at the top of page 8 the bill still
has the language that in creating the fund a process will be
created for confirming the existence of proven reserves
sufficient to authorize financing, and therefore the two should
work well together.
11:42:00 AM
REPRESENTATIVE TARR removed her objection to Amendment 5. There
being no further objection, Amendment 5 was adopted.
11:42:17 AM
REPRESENTATIVE CHENAULT moved to adopt Amendment 6, labeled, 29-
GH2613\A.13, Shutts, 5/30/16, which read:
Page 8, following line 24:
Insert a new subsection to read:
"(d) The authority may not provide financing for
a natural gas pipeline project for transporting
natural gas from the North Slope or Cook Inlet to
market."
REPRESENTATIVE TARR objected for discussion purposes.
REPRESENTATIVE CHENAULT explained that Amendment 6 is not the
amendment proposed by [AIDEA in the document provided in the
committee packet entitled, "Proposed ways to address concerns
expressed on HB 246]. He said his concern with the amendment
put forth by [AIDEA] is that it would exclude any pipeline of a
diameter of 30 inches or larger. Amendment 6 is almost verbatim
from the SETS fund, which basically says the same thing that
"except for a natural gas pipeline project for transporting
natural gas from the North Slope or Cook Inlet to market." The
amendment originally proposed by [AIDEA] for a pipe size of 30
inches or more was meant to try not to have the ability to fund
a big pipe from the North Slope to Cook Inlet. However, he
questioned, could [AIDEA] loan money to somebody who wants to
build a 12-inch pipeline from, say, Cook Inlet to Fairbanks?
His concern with the 30-inch size originally proposed by [AIDEA]
is that the state currently has on the shelf the drawings and
plans for a 24 inch, 2,500 pound per square inch (psi) pipeline
project. The [amendment proposed by AIDEA] would allow that
type of project to go forward, but Amendment 6 would not allow a
smaller pipeline to go to, say, Donlin Creek [Gold Mine] if the
mine chose to try financing it through AIDEA. Therefore, given
these concerns, he is unsure he wants to pass Amendment 6 and
would like to talk to [AIDEA] to make sure his interpretation is
the same as [AIDEA's], and, if it is, he may then want to
reconfigure the amendment for another committee.
11:45:29 AM
MR. THERRIAULT responded that the maker of the amendment does
bring up a legitimate concern. The authority's suggestion for
no bigger than 30 inches was to clearly preclude this mechanism
from somehow morphing into a tool to build a big pipeline across
the state of Alaska. It was not AIDEA's intent, though, that it
would preclude production facilities in the Cook Inlet area that
would deliver gas to ENSTAR Natural Gas Company's system,
because doing that would be technically taking that resource to
market. Thirty inches was an arbitrary number with the thinking
that that was a sensible way to separate that big export
pipeline from something that took place in the state.
REPRESENTATIVE CHENAULT offered his belief that Donlin Creek
Gold Mine is talking about running a 16-inch pipeline across
300-plus miles and is looking for its own financing. He
inquired whether adopting Amendment 6 would allow AIDEA to loan
money on that project if the mine were to seek financing from
the authority.
MR. THERRIAULT replied it may be good to remember that this
proposed fund is for oil and gas development with associated
infrastructure. So, for example, if Donlin Creek Gold Mine was
to propose just a pipeline with no oil and gas production, that
might be more suited to go to the SETS fund which talks about
transmission of resource.
REPRESENTATIVE CHENAULT understood where the 30 inches comes
from because some of the places up north use 30-inch pipelines
to move gas across the units. He stated that the more he thinks
about it the more he is comfortable with "what we have proposed
right now" and if something else changes he will try to get
another amendment offered in another committee.
REPRESENTATIVE JOHNSON suggested that if "or Cook Inlet" was
taken out of Amendment 6 it would send a signal to the next
committee of the intention. While he will yield to the maker of
the amendment, he said he wants to make sure that coming out of
this committee the intention of not having AIDEA financing a big
pipeline would be something that would be appropriate.
11:48:55 AM
REPRESENTATIVE SEATON noted that "to market" means where it is
going to be sold and would therefore mean that a pipeline from
any field to a community, such as a Barrow, could not be done
under [Amendment 6]. He asked whether the intention is to say
no natural gas pipelines would be financed through this or
whether it is specific that a big transmission/liquefaction
project cannot be financed through this. He posited that the
limitation of requiring legislative approval for projects over
$100 million might get to that point anyway. He requested the
maker of the amendment to discuss his intent.
REPRESENTATIVE CHENAULT answered that the intent of Amendment 6
is to not allow AIDEA to be able to use this [proposed] fund or
the SETS fund to finance a major gas pipeline. He said he is
looking at the 30 inches or more size versus the state's 24-inch
pipeline project that is sitting on the shelf that in anybody's
mind could be considered a big pipe. It does not necessarily
have to be 30, 42, or 48 inches; any pipeline traveling 800
miles is considered a large pipe. The intent of the amendment
is to not allow AIDEA to use this money in any form or fashion
to finance large in-state gas.
REPRESENTATIVE SEATON asked whether Representative Chenault
thinks the $100 million limit without legislative approval would
pretty well preclude that.
REPRESENTATIVE CHENAULT replied that while it may give some
comfort that the state does not get into a hole too deep, the
legislature needs to make clear what AIDEA is able to do with
that money and the legislature must be very clear that AIDEA is
not allowed to invest in a large in-state gas pipeline. It is
nothing against [AIDEA], it is just some concerns that have been
had over time with other administrations that the legislature
loses control and the last thing he wants to see is the
legislature losing control of the powers of purse.
11:52:40 AM
REPRESENTATIVE TARR drew attention to Section 10 of the bill on
page 6, lines 9-10, and noted that this language is from the
SETS fund and that it precludes [a loan or loan guarantee] from
being used to "purchase or acquire gas reserves or a gas lease
or become a working interest owner of a natural gas lease." She
understood that what is being contemplated under Amendment 6 is
a limitation that Representative Chenault thinks would also be
appropriate for the SETS fund. If the intent is to prevent use
in that way by either the SETS fund or the oil and gas
infrastructure development fund, she inquired whether they both
should be included in the amendment.
REPRESENTATIVE CHENAULT responded that he believes the current
SETS fund language states: "liquefaction, regasification,
distribution, storage, or use of natural gas, except a natural
gas pipeline project for transporting natural gas from the North
Slope or Cook Inlet to market." The change between SETS and
this [proposed] fund is that it would take out liquefaction,
regasification, distribution, storage, or other use of natural
gas, and insert "the authority may not provide financing for a
natural gas pipeline project for transporting natural gas" to or
from Cook Inlet. So, it would leave alone the liquefaction and
everything that is in SETS and would just mirror the language
that is currently in SETS.
11:54:51 AM
REPRESENTATIVE SEATON inquired whether Amendment 6 would limit
all funds under AIDEA, not just the [proposed] oil and gas
infrastructure development fund.
REPRESENTATIVE CHENAULT deferred to Mr. Therriault.
MR. THERRIAULT answered that Amendment 6 would be a limitation
just for this proposed new fund. The existing limitations on
the other funds would be unchanged. He said AIDEA understands
Representative Chenault's concern and early on AIDEA indicated
it was willing to accommodate whatever limitation language that
Representative Chenault wanted to introduce on this matter. He
added that AIDEA understands Representative Johnson's concern
about the committee indicating anything that impacts the Cook
Inlet area, and AIDEA would leave it up to the committee on how
it wants to move forward in that regard. But, should the
committee decide not to consider this or to consider this with
further modifications, AIDEA would work with Representative
Chenault to ensure that ultimately the language is satisfactory.
MR. PARADY addressed Representative Seaton's question by drawing
attention to page 6, line 19, of the bill. He pointed out that
these are the new sections being added, so they are not germane
to the other funds. This is the oil and gas infrastructure
development fund and its limitations, which he believes is what
the committee is seeking.
11:56:42 AM
REPRESENTATIVE JOSEPHSON asked whether the concern with the
friendly amendment from Representative Johnson is that it could
preclude AIDEA's assistance for bringing natural gas to North
Slope communities or the Interior from the north to the south.
If that is not the concern, he continued, then he does not know
why that friendly amendment would not work.
REPRESENTATIVE JOHNSON replied that his intent is to ensure that
AIDEA does not finance a big pipeline from the North Slope to
Cook Inlet. He said Representative Seaton brings up a good
point - he would not want to keep anyone from using that gas and
buying that gas. However, his main concern, like Representative
Chenault's, is that there are already enough agencies involved
in a big pipeline project.
11:57:45 AM
REPRESENTATIVE CHENAULT inquired whether the proposed oil and
gas infrastructure development fund would be used for a gas
pipeline transportation project.
MR. THERRIAULT responded that the proposed fund is focused on
production of oil and gas, but as oil and gas is produced it
needs to be transported to either a processing facility or
something of that nature. In the Cook Inlet the gas is clean
enough that it does not need to be processed, and when it
touches the ENSTAR Natural Gas Company system that is taking it
to market, and that would be allowed. If somebody came with
solely a pipeline project, there might be a little difficulty
and suggestion that maybe that project should instead go to the
SETS fund, which is geared towards transmission of resource.
11:58:57 AM
REPRESENTATIVE HERRON expressed his concern on Cook Inlet to
market because, though it is unlikely that the Donlin Creek Gold
Mine would seek financing from AIDEA, the gasline to the mine
project could potentially have excess capacity and that excess
capacity could be gas for an electrification project to power
part of the Kuskokwim. Therefore, he posited, it is important
this amendment be crafted correctly.
11:59:52 AM
REPRESENTATIVE CHENAULT withdrew Amendment 6, stating he prefers
to have more discussion about the amendment.
12:00:24 PM
CO-CHAIR TALERICO noted there are no more amendments for HB 246
at this time. He invited further discussion among the members.
REPRESENTATIVE JOHNSON opined that he has always had concern
about the proliferation of AIDEA because the projects AIDEA has
been involved in have been political decisions as opposed to
economic decisions, such as grain terminals and a fish plant in
Anchorage that has no landing of fish. A recent example is that
[the legislature] asked for AIDEA's assistance in evaluating the
purchase of the "716 Fourth Avenue property" and he understood
that [AIDEA] was told to pull out. Referring to [slide 13 of
AIDEA's PowerPoint presentation to the committee dated 3/16/16],
he inquired where in the decision tree the AIDEA board decided
to pull out and no longer assist in evaluating the acquisition
of that property. He further asked whether that was a political
decision or one made by the board through its decision tree.
MR. PARADY brought attention to Phase 1 of the decision tree
process which includes submission of the proposal description,
sponsor information, estimated costs, timing, and anticipated
AIDEA participation. He believed that a proposal did not come
before the AIDEA board in that context and deferred to Mr.
Springsteen to elaborate further.
MR. SPRINGSTEEN stated AIDEA never received a formal request for
AIDEA to participate in this project.
REPRESENTATIVE JOHNSON inquired why the AIDEA representative was
pulled from the discussion and asked how that come about.
Responding to Mr. Springsteen, he related that Mark Davis
[AIDEA's chief infrastructure development officer] was asked to
do some analysis and then Mr. Davis was told he could no longer
participate. Representative Johnson asked where in the decision
process that came from.
MR. SPRINGSTEEN answered that Mr. Davis had a conflict of
interest because he is married to a legislator.
REPRESENTATIVE JOHNSON asked whether anyone was asked to replace
Mr. Davis to assist the legislature.
MR. SPRINGSTEEN replied there had not been any formal request
after that point in time.
MR. PARADY added that part of ring-fencing AIDEA from political
projects is use of the process. He explained that the initial
project sponsor submittal is the entry point into the process
and noted that that did not occur.
REPRESENTATIVE JOHNSON said his concern is the politicization of
one the state's agencies.
12:04:57 PM
REPRESENTATIVE HERRON recalled that during a Legislative Council
meeting, specifically, Mr. Davis was asked to make comment and
he offered to assist in the decision process that the
legislature was going through on that Fourth Avenue legislative
information office (LIO) building. He further recalled it being
relayed to [the Legislative Council] from AIDEA that Mr. Davis
had a conflict, that to be clear of that conflict Mr. Davis was
set aside, and that it would have to go to the Legislative
Council chairman, Gary Stevens, to confirm that if Mr. Davis was
not available, could AIDEA assist the council with other
personnel. Representative Herron suggested that a conclusion to
this conversation be provided by raising the issue with the
Legislative Council chairman.
REPRESENTATIVE CHENAULT agreed AIDEA has been involved in the
projects mentioned by Representative Johnson, such as the fish
factory and others. He offered his belief that those projects
were politically motivated by someone in the legislature that
had the ability to push those projects. Millions of dollars
were spent on those and they were not good for Alaska. However,
he continued, AIDEA has done numerous projects that were
initiated through contacts with private industry, such as the
Red Dog Mine port project, Skagway ore terminal, and ship repair
in Ketchikan. Those and numerous other projects have been very
good for the state and; therefore, he does not want AIDEA to be
tarnished by projects that were pushed by the legislature rather
than the private industry that AIDEA deals with.
12:07:39 PM
REPRESENTATIVE SEATON posited that in these fiscal times the
conduit financing that may be offered through HB 246 could be
valuable to the industry without putting the state at risk. He
offered his support for HB 246 as an option that does not give
the state liabilities and that could potentially be valuable to
getting jobs and projects maintained or underway in Alaska.
REPRESENTATIVE TARR agreed with Representative Seaton's comments
and said she is pleased with his amendment that tightens up the
sideboards on what can be done with the fund and what kind of
financial commitment that would be. She offered her support for
the bill to be moved forward.
12:09:35 PM
REPRESENTATIVE HERRON moved to report HB 246, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 246(RES) was
reported from the House Resources Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB246 Ver A.pdf |
HRES 3/16/2016 1:00:00 PM HRES 5/30/2016 11:00:00 AM HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB246 Sectional Analysis.pdf |
HRES 3/16/2016 1:00:00 PM HRES 5/30/2016 11:00:00 AM HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB246 Fiscal Note-DCCED-AIDEA-01-14-16.pdf |
HRES 3/16/2016 1:00:00 PM HRES 5/30/2016 11:00:00 AM HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HSE RES HB 246 - AIDEA Oil and Gas Infrastructure Development Fund presentation.pdf |
HRES 5/27/2016 11:00:00 AM HRES 5/30/2016 11:00:00 AM HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| AIDEA's HB 246 proposed language to address legislative concerns 5.26.16.pdf |
HRES 5/27/2016 11:00:00 AM HRES 5/30/2016 11:00:00 AM HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| AOGA Opposition to HB 246 05 28 16.pdf |
HRES 5/31/2016 11:00:00 AM HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 1 - A.1 - Rep. Herron.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 2 - A.12 - Rep. Chenault.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 3 - A.10 - Rep Seaton.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 4 - A.3 - Rep. Seaton.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 5 - A.16 - Rep. Seaton.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |
| HB 246 Amd # 6 - A.13 - Rep. Chenault.pdf |
HRES 6/1/2016 11:00:00 AM |
HB 246 |