Legislature(2001 - 2002)

04/04/2001 01:05 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HCR 8-NORTH SLOPE NATURAL GAS PIPELINE ROUTING                                                                                
Number 1877                                                                                                                     
CO-CHAIR MASEK  announced that the  next order of  business would                                                               
be   HOUSE   CONCURRENT   RESOLUTION  NO.   8,   Expressing   the                                                               
legislature's  opposition to  the proposed  "northern" or  "over-                                                               
the-top"  route for  a natural  gas pipeline  to transport  North                                                               
Slope  natural  gas  reserves  to  the  domestic  North  American                                                               
market,   and    expressing   the   legislature's    support   of                                                               
commercialization  of North  Slope  natural gas  for the  maximum                                                               
benefit of the people of the state.                                                                                             
[There  was  a  motion  to  adopt  CSHCR  8(O&G)  for  discussion                                                               
purposes, but it was already before the committee.]                                                                             
Number 1825                                                                                                                     
REPRESENTATIVE JIM  WHITAKER, Alaska State  Legislature, sponsor,                                                               
told members that HCR 8  is a special-interest resolution for the                                                               
people of Alaska.   Furthermore, the resolution  does not compete                                                               
with  SB  164, but  stands  alone  as  a resolution  that  states                                                               
clearly that  "the legislature  opposes a  so-called over-the-top                                                               
routing for  a natural  gas pipeline,"  and that  the legislature                                                               
will do  all that is  within its  power to encourage  natural gas                                                               
commercialization  "in  a  manner  consistent  with  our  maximum                                                               
benefit constitutional mandate."                                                                                                
REPRESENTATIVE WHITAKER gave a  PowerPoint presentation, which he                                                               
explained was  the result of  consideration, over  several years,                                                               
of the subject of  natural gas and what it means  to the State of                                                               
Alaska.  [A  written copy of the presentation is  included in the                                                               
committee packet.]                                                                                                              
REPRESENTATIVE  WHITAKER  showed  the first  PowerPoint  "slide,"                                                               
titled "Natural Gas  in Alaska:  What does It  Mean to the People                                                               
of the  State?"   He told  the committee  that natural  gas means                                                               
$680   million  to   $4.2  billion   to  the   state  per   year;                                                               
significantly  lower energy  costs  for all  Alaskans; and  major                                                               
direct and  indirect employment  opportunities for  all Alaskans,                                                               
"if  we  demand  that  our  resource be  developed  in  our  best                                                               
REPRESENTATIVE  WHITAKER  referred  to   charts  provided  by  BP                                                               
[Exploration (Alaska) Inc.].   He said between 1985  and 1998 the                                                               
use of natural gas for  home heating had increased substantially,                                                               
to  70 percent.    Even  though heating  use  has decreased  from                                                               
electrical generation,  other uses have  significantly increased;                                                               
therefore,  use of  natural gas  has  dramatically increased  for                                                               
generating  electricity.   Gas  and  oil  [uses] are  increasing,                                                               
while coal [use] is declining, but gas  is at the top of the "new                                                               
energy mix."                                                                                                                    
REPRESENTATIVE WHITAKER indicated on a  chart that natural gas is                                                               
"clean  and  green," and  he  compared  the differential  between                                                               
waste products associated  with coal versus gas.   Natural gas is                                                               
also significantly less of an  air pollutant, compared to oil and                                                               
coal.  He added, "the demand for natural gas is soaring."                                                                       
REPRESENTATIVE  WHITAKER referred  to  a chart  titled "Supply  &                                                               
Demand  For North  America"  that depicts  a  "demand curve"  for                                                               
natural  gas in  North America,  conservatively projected  by the                                                               
Energy  Information  Administration.     Representative  Whitaker                                                               
indicated a  special additional supply  expected from  Mexico and                                                               
the Rocky  Mountain area, as  well as the Mackenzie  delta supply                                                               
and gas  from an Alaskan pipeline  project.  Based upon  the best                                                               
information available  today, he  concluded that the  demand [for                                                               
natural gas] exceeds the supply.                                                                                                
REPRESENTATIVE  WHITAKER   highlighted  another   chart  entitled                                                               
"Supply  &  Demand  For The  Pacific  Rim,"  showing  "contracted                                                               
supply volume"  and "contracted supply extension."   He mentioned                                                               
an Alaskan  LNG [liquefied natural  gas] project scheduled  to go                                                               
online in 2007 and a Sakhalin  LNG project scheduled to go online                                                               
[by  approximately 2004].   Representative  Whitaker stated  that                                                               
given  a  low  demand,  supply exceeds  demand;  given  a  medium                                                               
demand,  "it's  very tight";  and  given  a high  demand,  demand                                                               
exceeds supply.   He said he  was not nearly as  comfortable with                                                               
this  chart  as   the  previous  one;  however,   he  stated  his                                                               
confidence that "we'll raise supply to this level."                                                                             
Number 1378                                                                                                                     
REPRESENTATIVE  CHENAULT  asked  Representative Whitaker  if  the                                                               
number "70" on  the chart stood for metric tons  or billion cubic                                                               
REPRESENTATIVE  WHITAKER confirmed  that it  was in  metric tons.                                                               
He returned  to the PowerPoint  and introduced the  next category                                                               
entitled  "The  World  Market  Dynamic   Reality:    Supply  Will                                                               
Restrict  Demand For  The Foreseeable  Future," which  means that                                                               
prices will  remain significantly higher  than they have  been in                                                               
the past.   He  said, "Given  that Alaska's  North Slope  has the                                                               
largest undeveloped reserve  of natural gas in  North America, we                                                               
Alaskans,   and  particularly   we  legislators,   need  to   ask                                                               
ourselves,  'how  do  we  take  advantage  of  that  situation?'"                                                               
Representative Whitaker  said the simple answer  to that question                                                               
is that we [Alaskans] take our gas to market.                                                                                   
REPRESENTATIVE  WHITAKER   outlined  routing  options   shown  on                                                               
individual maps:   the "over-the-top"  route, which  he described                                                               
as undesirable;  the [governor's preferred] "highway"  route; the                                                               
TAGS [Trans-Alaska  Gas System]  route, touted by  Jeff Lowenfels                                                               
[of Yukon Pacific Corporation]; and the "hub" approach.                                                                         
REPRESENTATIVE  WHITAKER referred  to  a  projection showing  the                                                               
state constitution,  Article VIII,  Section 2, which  reads, "The                                                               
legislature shall  provide for the utilization,  development, and                                                               
conservation  of all  natural resources  belonging to  the State,                                                               
including  land  and  waters,  for the  maximum  benefit  of  its                                                               
people."  He  said that the constitution makes it  clear what the                                                               
responsibility of the legislature is.                                                                                           
REPRESENTATIVE  WHITAKER outlined  his  ideas  for attaining  the                                                               
maximum benefit and  best interest of Alaska.   He emphasized the                                                               
need for maximum market exposure,  saying an overland route alone                                                               
would  exclude markets  throughout the  world, specifically  Asia                                                               
and  probably the  U.S. West  Coast.   By connecting  to multiple                                                               
markets,  "we stabilize  market opportunities  for this  very ...                                                               
valuable commodity  resource."  He noted  that the "over-the-top"                                                               
and "Foothills/highway"  routes exclude Asia, and  the TAGS route                                                               
excludes mid-America; therefore, he  stated that the hub approach                                                               
provides maximum market exposure.                                                                                               
REPRESENTATIVE  WHITAKER next  discussed  how  to obtain  maximum                                                               
dollars to  the state.   He specified two options  for financing:                                                               
public and private.  Public  financing, he explained, will exempt                                                               
the financing component from  federal taxes, "which significantly                                                               
improves the  economics of an  Alaskan gas project  and increases                                                               
the return to the state."   Additionally, Representative Whitaker                                                               
estimated  that  the return  on  financing  a project  this  size                                                               
should  be  "8-12 percent  of  capital  costs  per year,  for  30                                                               
years," which would be a significant return to the state.                                                                       
REPRESENTATIVE  WHITAKER turned  to  the issue  of public  versus                                                               
private  ownership.   He  told the  committee  that under  public                                                               
ownership, besides being exempt from  all federal income taxes, a                                                               
state-owned pipeline would  give a greater netback  to the state.                                                               
Furthermore, the  state would not  pay a tariff for  royalty gas.                                                               
In comparison, under  private ownership the returns  on a project                                                               
would be  much less  to the  state because of  taxes paid  to the                                                               
federal  government and  a tariff  paid  on royalty  gas to  "big                                                               
oil."  Representative Whitaker clarified  that he is not an enemy                                                               
of  "big oil,"  stating that  he  lived in  Alaska before  [those                                                               
companies] were here and that  his options for prosperity and for                                                               
opportunity  were significantly  less than  they are  today.   He                                                               
     What's  the  difference   between  public  and  private                                                                    
     ownership?  We've made an  assumption.  That assumption                                                                    
     is a six bcf [billion  cubic feet] per day project. ...                                                                    
     Given that,  and given a rather  conservative gas price                                                                    
     at  $2.59   per  million   Btu(s),  which   is  roughly                                                                    
     equivalent to 1,000 cubic feet,  in mid-America -- this                                                                    
     is the Purvin  & Gertz model.  We didn't  change it; we                                                                    
     used all their  assumptions.  What we did  insert was a                                                                    
     six bcf project,  [with] four ... bcf per  day going to                                                                    
     mid-America [and] two bcf per day as an "LNG" option.                                                                      
REPRESENTATIVE  WHITAKER  said  assuming  a price  of  $2.59  per                                                               
million  Btu(s),  the  state would  receive  $1.3  billion  under                                                               
public ownership  and only $680 million  under private ownership.                                                               
He indicated that the charts  also gave assumptions of gas prices                                                               
at   $4.50  and   $8.00.     Currently   the   price  is   $5.34.                                                               
Representative Whitaker noted that the  return to the state would                                                               
be a  fair one.   He added, "This  is a huge  commodity resource,                                                               
the power of which should never be minimized."                                                                                  
Number 0765                                                                                                                     
REPRESENTATIVE STEVENS  asked Representative Whitaker  to explain                                                               
what he meant by "tariff."                                                                                                      
REPRESENTATIVE  WHITAKER  replied that  the  tariff  is a  charge                                                               
assessed to those  who use the facility.  In  response to follow-                                                               
up questions, he explained:                                                                                                     
     The owners  of the current TAPS  [Trans-Alaska Pipeline                                                                    
     System] are  those [who] assess  the tariff.   And that                                                                    
     is  charged  to themselves,  as  well  as other  users,                                                                    
     including  the state.   As  the current  owners of  the                                                                    
     existing TAPS  line have the right  and the opportunity                                                                    
     to charge a  tariff - which is essentially  a return on                                                                    
     investment -  so too would  the state ... have  a right                                                                    
     and an  opportunity to  charge a  transportation tariff                                                                    
     [on a state-owned gas pipeline].                                                                                           
REPRESENTATIVE  WHITAKER returned  to  his discussion,  detailing                                                               
"maximum in-state usage opportunities"  that increase in relation                                                               
to two  factors:  the  number of population centers  the pipeline                                                               
crosses,  and the  number of  miles  of pipe  in the  state.   He                                                               
indicated  the "over-the-top"  route does  not include  those two                                                               
factors;  the  "highway" route  is  "close";  the TAGS  route  is                                                               
"closer"; and the hub route works the best.                                                                                     
Number 0585                                                                                                                     
REPRESENTATIVE  WHITAKER  addressed  the  next  PowerPoint  idea:                                                               
"Maximum  Competition For  Gas Production,"  which he  emphasized                                                               
was a key criterion.  He stated:                                                                                                
     Given that a  competitor cannot have equal  access to a                                                                    
     gas  pipeline,  given  that   that  competitor  is  not                                                                    
     receiving the benefit of a  tariff that an owner would,                                                                    
     that competitor is at a  competitive disadvantage.  And                                                                    
     we find  that to  be true with  the current  TAPS line.                                                                    
     We should not allow that to happen again.                                                                                  
     There was a  time when we were producing,  on the North                                                                    
     Slope, 2.1 million barrels of  oil [per day].  Today we                                                                    
     have  three  producers  and they  produce  1.1  million                                                                    
     barrels per day.   A number of factors  relate to that;                                                                    
     certainly depletion is one of  those factors.  But I am                                                                    
     nearly  emphatic in  my  statement  that a  significant                                                                    
     part is played  in the production decline  on the North                                                                    
     Slope   that  relates   directly  to   the  number   of                                                                    
     competitors doing business on the North Slope.                                                                             
REPRESENTATIVE  WHITAKER emphasized  that [Alaska]  should strive                                                               
to have  the maximum number of  competitors for gas on  the North                                                               
Slope,  which it  cannot  do  unless there  is  a publicly  owned                                                               
pipeline, which ensures  that no producer will  be precluded from                                                               
having equal access at an equal cost.                                                                                           
Number 0447                                                                                                                     
REPRESENTATIVE   WHITAKER  turned   attention  to   "Maximum  Job                                                               
Opportunities For  Alaskans," calling  it a "no-brainer"  that it                                                               
is the state's  job to ensure that both  short-term and long-term                                                               
jobs associated  with the  gas pipeline  project are  provided to                                                               
REPRESENTATIVE WHITAKER concluded  his PowerPoint presentation by                                                               
summarizing the reasons that the  hub approach, publicly financed                                                               
and owned, yet  privately operated, would be the  best choice and                                                               
would serve  the best  interests of  all Alaskans.   He  told the                                                               
committee  that  there is  substantial  basis  to what  had  been                                                               
discussed:   sound economics,  and a  sound understanding  of the                                                               
market.   He added, "It is  very clear that Alaska's  natural gas                                                               
resource is  substantially larger than  we might have  thought at                                                               
first glance."                                                                                                                  
REPRESENTATIVE WHITAKER emphasized that  the resolution makes two                                                               
statements:   First, there should  be no  "over-the-top" routing.                                                               
And    second,   the    legislature   should    acknowledge   its                                                               
responsibility to ensure that this  resource goes to market "in a                                                               
manner consistent  with the  best interest of  the people  of the                                                               
state of Alaska."                                                                                                               
Number 0144                                                                                                                     
CO-CHAIR MASEK  asked whether  Representative Whitaker  had plans                                                               
to distribute the resolution to any groups in particular.                                                                       
REPRESENTATIVE  WHITAKER answered  that  he hadn't  thought of  a                                                               
distribution  list, but  would certainly  entertain any  thoughts                                                               
the committee  might have  in regard  to that, in  the form  of a                                                               
committee substitute.                                                                                                           
TAPE 01-30, SIDE A                                                                                                              
Number 0053                                                                                                                     
REPRESENTATIVE   WHITAKER,  in   response   to   a  question   by                                                               
Representative  Stevens, said  in "our"  model an  assumption was                                                               
made that  the cost of  a pipeline  project would be  financed by                                                               
the permanent  fund.   He said  it is beyond  him why  "we" would                                                               
borrow money when we have a  substantial amount to begin with; he                                                               
doesn't think  [the state] could  make a better  investment, both                                                               
for infrastructure or on investment  return.  The return from the                                                               
permanent fund this past year  was "less than sterling," which is                                                               
to be expected during a market downturn, he commented.                                                                          
REPRESENTATIVE  WHITAKER  explained  that  this  is  a  long-term                                                               
investment, guaranteeing  a return somewhere in  the neighborhood                                                               
of  8  to  12  percent,  which  outperforms  the  permanent  fund                                                               
historically.  The  risk is that the market would  "go away," but                                                               
Representative Whitaker  said he didn't think  that would happen.                                                               
He  reiterated that  the assumption  is that  the permanent  fund                                                               
would finance the project.                                                                                                      
Number 0211                                                                                                                     
MICHAEL J.  HURLEY, Government Relations, North  American Natural                                                               
Gas Pipeline Group, came forward to testify as follows:                                                                         
     As you are aware,  the three companies participating in                                                                    
     the  group (BP,  Exxon/Mobil, and  Phillips) have  been                                                                    
     working  diligently to  develop an  economically viable                                                                    
     project  to commercialize  North Slope  natural gas  by                                                                    
     pipeline through  Canada to the  Lower 48 market.   And                                                                    
     in doing that, it is  incumbent on us to fully consider                                                                    
     the options that could help us accomplish that goal.                                                                       
     Indeed,  the   Federal  Energy   Regulatory  Commission                                                                    
     [FERC], before  it will issue  a certificate  of public                                                                    
     convenience  and  necessity,  requires  us  to  analyze                                                                    
     alternative  pipeline  route  options as  part  of  the                                                                    
     application process.                                                                                                       
     This  project  has  the potential  to  be  the  largest                                                                    
     energy  project  in  North America,  and  will  require                                                                    
     capital investments in the billions  of dollars.  These                                                                    
     investment decisions cannot be  taken lightly, and must                                                                    
     be made with the confidence  that can only be gained by                                                                    
     a  thorough  evaluation  of the  alternatives,  and  an                                                                    
     understanding of their  relative strengths, weaknesses,                                                                    
     risks, and  rewards.  Such  an approach  is fundamental                                                                    
     to good business decision-making.                                                                                          
     Our  efforts   have  been   focused  on   creating  and                                                                    
     understanding     opportunities,    not     prematurely                                                                    
     discarding them.   This resolution seems  to suggest we                                                                    
     do  the latter.    We believe  that legislative  action                                                                    
     which recommends shutting down  options before they are                                                                    
     fully understood limits dialog  and interferes with the                                                                    
     fundamental dynamics of a free-market economy.                                                                             
     It cannot  be forgotten  that any Alaskan  gas project,                                                                    
     whether  it's  LNG,  GTL [gas-to-liquids]  or  pipeline                                                                    
     technology,  must be  able to  deliver products  to the                                                                    
     market  at  a competitive  cost  in  order to  succeed.                                                                    
     There are  many other competing sources  of supply, and                                                                    
     buyers will  be going elsewhere  if a project  fails to                                                                    
     deliver  in  this regard.    If  either Alaska  project                                                                    
     advances, the  benefits to the  state and  its citizens                                                                    
     and  businesses will  be substantial,  and will  make a                                                                    
     significant contribution to Alaska's economic future.                                                                      
     Finally,  the work  we are  undertaking this  year will                                                                    
     yield  information that  we believe  will be  necessary                                                                    
     for reasoned  decision making.  We  have been listening                                                                    
     to  the views  and concerns  of the  Alaska legislature                                                                    
     and  Alaska's  citizens,  and  we  will  be  evaluating                                                                    
     alternatives on  the basis of seven  criteria:  overall                                                                    
     project  economics, Alaskan  access  to  gas, jobs  for                                                                    
     Alaskans, revenues to  the state, safety, environmental                                                                    
     protection, and project timing.                                                                                            
MR.  HURLEY said  [his group]  doesn't  feel that  it has  enough                                                               
information to make  a "route" decision based  on those criteria,                                                               
which  is  the reason  for  its  aggressive  work program.    The                                                               
interest of  commercializing North  Slope gas  is best  served by                                                               
creating, not  eliminating, choices.   [The group]  expects there                                                               
will  be  many  opportunities  in   the  future  for  legislative                                                               
guidance and action.                                                                                                            
Number 0565                                                                                                                     
REPRESENTATIVE SCALZI  asked if  [the group has  put] a  value on                                                               
what benefits Alaska might utilize  in terms of production of gas                                                               
in  the state  and  the [sustainability  of  the] workforce  when                                                               
assessing choices.                                                                                                              
MR. HURLEY said  that is part of the seven  criteria; [the group]                                                               
understands  that those  are interests  to the  citizens and  the                                                               
legislature of  the state.   [The  group] understands  what those                                                               
things mean  to the parties  involved, and [they] are  taken into                                                               
account.  For any kind of analysis  one does on a project of this                                                               
magnitude, there is always a balance of benefits.                                                                               
MR. HURLEY noted  that those balances need to be  made in an open                                                               
discussion between industry and  the stakeholders in the project.                                                               
This will include the State of  Alaska, Canada, some of the Lower                                                               
48 states  that the pipeline  will pass  through, as well  as the                                                               
relevant federal [agencies].   All will have a stake  in how this                                                               
decision  ultimately  gets made;  [the  group]  wants to  try  to                                                               
recognize the interests of all parties involved.                                                                                
Number 0730                                                                                                                     
REPRESENTATIVE SCALZI asked if  an environmental impact statement                                                               
(EIS) is  going to be  done to quantify  a dollar value  to these                                                               
things,  or whether  there will  just be  the "generic  tradeoff"                                                               
MR. HURLEY explained  that [the group] fully expects  that an EIS                                                               
will be done during this  process, as well as other socioeconomic                                                               
studies  that  are  required  as   part  of  the  Federal  Energy                                                               
Regulatory Commission  (FERC) application process.   He said that                                                               
is part  of the  program [the  group] is  working on  during this                                                               
year, which needs to be concluded before the applications go in.                                                                
Number 0783                                                                                                                     
REPRESENTATIVE   FATE   referred   to  FERC's   issuance   of   a                                                               
certificate.  He  asked if the discussion on  this point referred                                                               
to the northern or "over-the-top route,"  or to a route that FERC                                                               
had already issued  certificates on, the southern  route down the                                                               
MR. HURLEY responded  that the "over-the-top" route  would need a                                                               
new  certificate.   It  is  [the  group's] expectation  that  the                                                               
southern route  may end  up getting a  new certificate,  too, but                                                               
[the group]  doesn't know that.   Right now, there is  a lot that                                                               
FERC is unsure of, according  to some of FERC's recent documents.                                                               
What [the  group] is  doing right  now is to  push forward  as if                                                               
these are  going to be  "two green options," because  [the group]                                                               
doesn't  want to  wait for  that to  be resolved  before starting                                                               
MR.  HURLEY   said  in  either   case,  whether   using  existing                                                               
certificates or  new ones,  he believes  a lot  of the  work that                                                               
will be done by  the group during the year will  be necessary.  A                                                               
lot of the new environmental  work and socioeconomic will need to                                                               
be  done;  those  kinds  of   things  aren't  under  an  existing                                                               
Number 0926                                                                                                                     
REPRESENTATIVE  FATE  referred to  the  seven  criteria used  for                                                               
evaluation.  He  questioned the one that  says, "Alaskans' access                                                               
to gas" and asked if the intent was for local markets.                                                                          
MR. HURLEY responded affirmatively.   He said "we" understand the                                                               
need  and interest  in having  gas for  local consumption  in the                                                               
REPRESENTATIVE  FATE  said  he didn't  see  anywhere  where  [the                                                               
group]  had taken  into account  the political  awareness or  the                                                               
Alaska constitutional  mandate, which was seen  on the PowerPoint                                                               
presentation.   He asked  if it  would be  among the  points that                                                               
[the group] uses as criteria.                                                                                                   
MR. HURLEY  replied that he  wouldn't put  it that way,  but many                                                               
things  inherent in  the constitutional  mandate are  things [the                                                               
group] is  looking at  in the seven  points.   The constitutional                                                               
mandate is a  mandate to the legislature;  [the group] recognizes                                                               
the  things [the  legislature] is  interested in,  and is  taking                                                               
those into account within the seven points.                                                                                     
Number 1065                                                                                                                     
REPRESENTATIVE McGUIRE  said she  sees in Mr.  Hurley's testimony                                                               
that  FERC  requires  an  analysis  of  multiple  options  before                                                               
issuing  a  certificate.     She  asked,  "Are   you  making  the                                                               
assumption that anything in this  resolution that the legislature                                                               
passes ...  would preclude you  from still analyzing  those other                                                               
MR.  HURLEY replied  no.   He explained  that a  resolution is  a                                                               
statement of preference, and said  the legislature absolutely has                                                               
a right  to have a preference.   [The North American  Natural Gas                                                               
Pipeline Group]  would suggest [to  the legislature] that  it may                                                               
be  premature to  have a  preference in  that there  is a  lot of                                                               
information  currently  being  developed.   He  noted  that  [the                                                               
group] is  spending $75 million this  year developing information                                                               
about the  alternatives, which will  provide more  information in                                                               
order to make a better decision.                                                                                                
Number 1189                                                                                                                     
REPRESENTATIVE STEVENS asked Mr. Hurley  if he disagrees with any                                                               
of  the   figures  that  Representative  Whitaker   used  in  his                                                               
MR. HURLEY  responded that he  [would disagree].  However,  he is                                                               
not prepared to  talk about the facts and figures  in detail.  He                                                               
stated   that  he   is  suggesting   that  there   is  additional                                                               
information  that will  be appropriate  for [the  legislature] to                                                               
think about before making a decision on a preference.                                                                           
REPRESENTATIVE  STEVENS remarked  that he  assumes Mr.  Hurley is                                                               
not objecting to the figures that were used.                                                                                    
MR. HURLEY  replied that he does  disagree with some of  them and                                                               
has some  questions; one  example is with  respect to  the tariff                                                               
number  that  was asked  about  earlier.   His  understanding  of                                                               
tariffs, having done  them for some of the  North Slope pipeline,                                                               
is that they  are primarily made up of two  components:  cost and                                                               
rate of return.   He noted that he has not had  chance to look at                                                               
Representative  Whitaker's numbers;  therefore,  he doesn't  know                                                               
what they represent.                                                                                                            
REPRESENTATIVE KERTTULA commented that  she didn't understand how                                                               
the tariffs worked either.                                                                                                      
Number 1399                                                                                                                     
CO-CHAIR MASEK made a motion  to adopt a conceptual amendment, at                                                               
the  bottom of  the resolution,  adding,  "copies to  be sent  to                                                               
President Bush, Secretary of Interior  Gail Norton, the Governor,                                                               
U.S. Congress, and other major development companies."                                                                          
Number 1500                                                                                                                     
REPRESENTATIVE  FATE  made a  motion  to  move CSHCR  8(O&G),  as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
attached fiscal  note.   There being  no objection,  CSHCR 8(RES)                                                               
moved from the House Resources Standing Committee.                                                                              

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