Legislature(2001 - 2002)

04/11/2001 01:10 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
SB 164-NO GAS PIPELINE OVER BEAUFORT SEA                                                                                      
                                                                                                                              
CO-CHAIR MASEK  announced that the  next order of  business would                                                               
be  SENATE BILL  NO. 164,  "An Act  prohibiting leases  under the                                                               
Right-of-Way  Leasing Act  on state  land in  or adjacent  to the                                                               
Beaufort Sea; and providing for  an effective date."  [Before the                                                               
committee was HCS SB 164(O&G).]                                                                                                 
                                                                                                                                
[There was  a motion to  adopt the bill for  discussion purposes,                                                               
but it was already before the committee.]                                                                                       
                                                                                                                                
Number 0103                                                                                                                     
                                                                                                                                
SENATOR JOHN  TORGERSON, Alaska State Legislature,  sponsor of SB
164, indicated the  "over-the-top" route does not  serve the best                                                               
interests of  the state.  He  listed some benefits of  a pipeline                                                               
that would not  exist with the over-the-top route:   in-state use                                                               
of  natural gas;  maximum benefits  for short-term  and long-term                                                               
jobs; a  significant long-term property  tax base for  the state;                                                               
and value-added industries.                                                                                                     
                                                                                                                                
TAPE 01-35, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
SENATOR TORGERSON paraphrased an excerpt from page 3, lines 11-                                                                 
14, which read in part:                                                                                                         
                                                                                                                                
          (b) Consistent with the legislative policy and                                                                        
     goals set out in (a)  of this section, the commissioner                                                                    
     may not grant  a lease across state land that  is in or                                                                    
     adjacent to the Beaufort  Sea for pipeline right-of-way                                                                    
     purposes to  authorize construction and operation  of a                                                                    
     natural gas  pipeline following a "northern"  or "over-                                                                    
     the-top" route ...                                                                                                         
                                                                                                                                
          (c) The limitation on leasing set out in (b) of                                                                       
     this section  does not apply  on and after the  date on                                                                    
     which  a natural  gas pipeline  following a  "southern"                                                                    
     route that  parallels the Trans Alaska  Pipeline System                                                                    
     and  the  Alaska  Highway   to  transport  North  Slope                                                                    
     natural  gas  to  North   American  markets  or  Alaska                                                                    
     tidewater for delivery to  foreign and domestic markets                                                                    
     has been completed and has begun operation.                                                                                
                                                                                                                                
SENATOR  TORGERSON  pointed  out  the  new  language  of  HCS  SB
164(O&G) on page 2 [lines  15-22], saying it originates from "the                                                               
"Northstar  bill"  and deals  with  the  effectiveness of  having                                                               
maximum local hire.                                                                                                             
                                                                                                                                
Number 0210                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN inquired if SB 164 had been subjected to                                                                   
legal review regarding the issue of the legislature's limiting                                                                  
the commissioner's leasing authority.                                                                                           
                                                                                                                                
SENATOR TORGERSON replied:                                                                                                      
                                                                                                                                
     I do  have a legal  opinion that basically  talks about                                                                    
     three  issues that  were  raised  in earlier  hearings:                                                                    
     one is equal protection; one  is a commerce clause; and                                                                    
     one is separation of powers.   And our legal department                                                                    
     has found all of them not to be valid.                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN clarified that Senator Torgerson meant all                                                                 
language in the bill passes muster.                                                                                             
                                                                                                                                
Number 0312                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA asked  Senator  Torgerson  if his  legal                                                               
sources  considered  whether  the  companies  had  to  study  any                                                               
alternative routes.                                                                                                             
                                                                                                                                
SENATOR TORGERSON  said that  question had not  been raised.   He                                                               
mentioned  that the  committee might  hear in  upcoming testimony                                                               
that [the companies] are required  to do alternative studies on a                                                               
particular route.  He offered his personal opinion:                                                                             
                                                                                                                                
     The route has  already been chosen by  the President of                                                                    
     the United  States and by  Congress.  It's  ratified by                                                                    
     treaty between Canada  and the United States.   That is                                                                    
     the route.   So if they  wanted to lay the  pipe in the                                                                    
     route that's  already authorized, an  alternative route                                                                    
     - alternative methodology  - is not required.   If they                                                                    
     wanted to select  a different route, no  matter what it                                                                    
     was, then  they would  ... be  required to  do studies,                                                                    
     unless they could  prove cause that that  route was the                                                                    
     only route  that is feasible  and no other  route could                                                                    
     be.  But  in any event, they'd probably  be involved in                                                                    
     doing other studies.                                                                                                       
                                                                                                                                
REPRESENTATIVE  KERTTULA  clarified that  she  had  asked out  of                                                               
curiosity, not because she objected to SB 164.                                                                                  
                                                                                                                                
Number 0430                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  expressed concern  that although  he likes                                                               
the route, he  has "just a little bit of  reservation about tying                                                               
our  hands  completely  on  this."   He  mentioned  a  resolution                                                               
recently passed by the House, but  said [SB 164] states more than                                                               
the resolution;  it "says this  is the  only way you're  going to                                                               
go."  He asked Senator Torgerson  if he could predict any future,                                                               
detrimental consequences of closing  the options, even though the                                                               
intent of the bill seems clear today.                                                                                           
                                                                                                                                
SENATOR TORGERSON  answered that the "over-the-top"  route is the                                                               
option being  closed off, for  the reason  that there will  be no                                                               
value-added  industry  in  Alaska  on "gas  we  can't  get,"  and                                                               
because jobs  and tax  valuations wouldn't  be spread  across the                                                               
state  to the  maximum benefit.    He added  that LNG  [liquefied                                                               
natural gas]  routes are  still open  and said  this is  just one                                                               
buried pipe in the Beaufort  Sea that [the legislature] is saying                                                               
"no" to.                                                                                                                        
                                                                                                                                
SENATOR TORGERSON  mentioned a  route proposed  in 1977  that was                                                               
"onshore ANWR."  Although [the  Alaska State Legislature] did not                                                               
act on that,  Senator Torgerson said Congress  and the government                                                               
of Canada did, because the  proposed area was too environmentally                                                               
sensitive.   He  remarked, "So,  if a  pipeline's environmentally                                                               
sensitive  onshore, heaven  knows what  it's going  to be  called                                                               
offshore, buried under the ice."   He added that the only benefit                                                               
of this route might be to  the treasury, but overall it would not                                                               
be good for the State of Alaska.                                                                                                
                                                                                                                                
Number 0705                                                                                                                     
                                                                                                                                
MICHAEL HURLEY, Government Relations,  North American Natural Gas                                                               
Pipeline  Group  (NANGPG),  stated   that  he  must  respectfully                                                               
disagree with Senator  Torgerson.  He mentioned  that his written                                                               
testimony was very similar to  the testimony he gave the previous                                                               
week for  [HCR 8]; therefore, he  would not read it  to the House                                                               
Resources  Standing Committee  today.   [A copy  of Mr.  Hurley's                                                               
written testimony is included in  the committee packet and can be                                                               
found in  the minutes  for HCR  8.]   He specified  that [NANGPG]                                                               
believes passage of  SB 164 at this time -  removing options from                                                               
the table - is not a good idea and is premature.                                                                                
                                                                                                                                
Number 0789                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  noted for  the record a  letter [included  in the                                                               
committee packet] from Commonwealth North.   She said it appeared                                                               
[Commonwealth North]  would like to have  adequate opportunity to                                                               
evaluate all options prior to making this bill law.                                                                             
                                                                                                                                
Number 0850                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE  asked Mr. Hurley  when an opportune  time to                                                               
pass this legislation would be.                                                                                                 
                                                                                                                                
MR. HURLEY  replied that NANGPG  is currently engaged  in studies                                                               
throughout this  year, spending  in excess of  $75 million  to do                                                               
the engineering work and to  study the attributes of both routes.                                                               
He suggested that the committee  wait for NANGPG's input from its                                                               
economic, socioeconomic,  and environmental  studies, as  well as                                                               
input  from   the  U.S.  federal  government   and  the  Canadian                                                               
government.                                                                                                                     
                                                                                                                                
REPRESENTATIVE  FATE  responded  that  although he  is  a  strong                                                               
proponent of the oil and gas  industry, "input" means to him that                                                               
[the  legislators] are  not  really  players at  the  table.   He                                                               
mentioned a  recent energy meeting  where "the  considerations of                                                               
the exploration of  the gas were so prolific" that  there may not                                                               
be  time to  wait for  NANGPG  to produce  a report  that has  no                                                               
timeline, because the market may close.                                                                                         
                                                                                                                                
REPRESENTATIVE FATE  characterized the state's  responsibility to                                                               
its  "shareholders"   as  similar  to  the   responsibilities  of                                                               
companies to their  shareholders.  He expressed hope  that SB 164                                                               
would  be taken  by the  industry as  "piece of  legislation that                                                               
mirrors our  concern about these  timelines."  He  also expressed                                                               
hope  that it  would  galvanize the  producers  into making  some                                                               
decisions that would speed up the process.                                                                                      
                                                                                                                                
Number 1113                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN expressed his  commitment to a pipeline that                                                               
comes down through  the middle of the state; however,  he said he                                                               
thought it  was premature  to determine  now that  the [over-the-                                                               
top]  route will  not work,  even though  he is  against it  now.                                                               
Representative  Green said  he wants  to know  what he  is saying                                                               
"no"  to, rather  than  saying  "no" to  something  that is  just                                                               
feared.    Representative  Green  said although  he  thought  the                                                               
timing of SB 164 was wrong, however, he would support it.                                                                       
                                                                                                                                
Number 1218                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK said she shared Representative Green's concerns.                                                                 
                                                                                                                                
Number 1236                                                                                                                     
                                                                                                                                
JACK  GRIFFIN,  Assistant Attorney  General,  Oil,  Gas &  Mining                                                               
Section,   Civil  Division   (Anchorage),   Department  of   Law,                                                               
testified via teleconference.  He  indicated some potential legal                                                               
issues within the  language of SB 164.  He  reminded members that                                                               
neither  he  nor [Legislative  Legal  Services]  could rule  upon                                                               
whether a particular legal objective  was valid, however, because                                                               
that  is the  courts'  functional; he  surmised, therefore,  that                                                               
counsel from [Legislative Legal  Services] had probably said that                                                               
if  presented with  "these legal  arguments,"  the courts  should                                                               
rule  that this  law will  withstand constitutional  review.   He                                                               
went on to say:                                                                                                                 
                                                                                                                                
     At  least with  respect  to the  commerce clause  issue                                                                    
     [and equal]  protection clause issue,  I would  like to                                                                    
     say  that   I  would  agree  with   [Legislative  Legal                                                                    
     Services] on that.   It would also be my  view that, if                                                                    
     the  court  were  presented with  the  commerce  clause                                                                    
     issue and equal protection  issues that I've identified                                                                    
     previously  in testimony,  they  should  find that  the                                                                    
     laws withstand challenges under those clauses.  But I                                                                      
     don't think that's the case.                                                                                               
                                                                                                                                
MR.  GRIFFIN  indicated  the  question  to  ask  is  whether  any                                                               
relatively simple  changes could be  made to the bill  that would                                                               
strengthen  [the  state's] position  on  these  types of  crucial                                                               
issues.  From his perspective and  that of the Department of Law,                                                               
several relatively simple changes  could be made without changing                                                               
the  ultimate intent  of the  legislature in  any way,  but which                                                               
would  help   in  defending  any  legal   challenges  that  might                                                               
ultimately  be  brought by  those  who  might disagree  with  the                                                               
legislature's policy choice in this case.                                                                                       
                                                                                                                                
MR.  GRIFFIN  noted   that  he  had  been   speaking  to  Senator                                                               
Torgerson's  staff  and  would  make  himself  available  to  the                                                               
Senator  and the  committee to  explore possible  changes to  the                                                               
language of the bill.                                                                                                           
                                                                                                                                
Number 1464                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK asked Mr. Griffin  to share his ideas for amending                                                               
the language.   [Co-Chair Masek had a copy of  the latest version                                                               
faxed  to Mr.  Griffin; meanwhile,  she called  Senator Torgerson                                                               
back to the witness table.]                                                                                                     
                                                                                                                                
Number 1636                                                                                                                     
                                                                                                                                
SENATOR  TORGERSON  told  the  committee  that  Mr.  Griffin  has                                                               
repeatedly proposed  changes to  SB 164  during his  testimony at                                                               
several  committee meetings.   Senator  Torgerson stated  that he                                                               
will  not be  in  favor of  making the  changes  proposed by  Mr.                                                               
Griffin until  he hears  from [the  governor's office]  that they                                                               
are in  agreement to the  bill.   He explained that  the governor                                                               
has  expressed dislike  for SB  164  in his  public speeches  and                                                               
other comments.   He remarked  on the difference between  the Mr.                                                               
Griffin's opinion and that of [Legislative Legal Services].                                                                     
                                                                                                                                
Number 1725                                                                                                                     
                                                                                                                                
MR.  GRIFFIN  responded   that  he  didn't  think   there  was  a                                                               
difference  between his  opinion and  that of  [Legislative Legal                                                               
Services],  at least  in regard  to the  commerce clause  and the                                                               
equal protection  issue.  Rather,  the question is  whether there                                                               
is a better way to present [SB 164], ultimately, to the court.                                                                  
                                                                                                                                
Number 1822                                                                                                                     
                                                                                                                                
MR. GRIFFIN informed the committee  that he'd received the latest                                                               
version of SB 164.  He  recommended the following amendments:  On                                                               
page  3,   Section  3,  subparagraph  (b),   lines  14-17,  after                                                               
"operation  of  a  natural gas  pipeline",  delete  "following  a                                                               
'northern' or  'over-the-top' route  running east from  the North                                                               
Slope to Canada's  Mackenzie River Valley, then south  to link to                                                               
existing pipeline  networks to transport North  Slope natural gas                                                               
to  North  American  markets.";  and  add  "for  distribution  of                                                               
natural gas market".                                                                                                            
                                                                                                                                
MR. GRIFFIN articulated the rationale  for that change, saying at                                                               
this time  a route  through the state's  submerged lands  off the                                                               
coast of  ANWR is not  in the best  interest of the  state, given                                                               
that  there is  another  federally approved  route  to get  North                                                               
Slope gas to foreign and interstate  markets.  The reason for the                                                               
change is  to generalize the  language as much as  possible while                                                               
still  accomplishing  the  legislative  purpose  at  hand.    Mr.                                                               
Griffin cautioned,  "By identifying the project  so specifically,                                                               
you open the door to technical legal arguments."                                                                                
                                                                                                                                
MR.  GRIFFIN also  recommended  the  elimination of  subparagraph                                                               
(c), lines  18-22, from page  3 of the  bill, because he  said he                                                               
did  not think  that  language was  necessary  to accomplish  the                                                               
present legislative purpose.  He explained:                                                                                     
                                                                                                                                
     It may  very well be  that even after  the construction                                                                    
     and operation  of a southern pipeline,  the legislature                                                                    
     might feel that  it's not in the  state's best interest                                                                    
     to  have a  sub-sea pipeline  off the  coast of  Alaska                                                                    
     that spans  100 or 150  miles.   We don't have  all the                                                                    
     facts ... today  to know whether that's going  to be in                                                                    
     the state's best interest or not.                                                                                          
                                                                                                                                
MR.  GRIFFIN recommended  sticking  with  the legislative  policy                                                               
choice articulated  in [his amended]  subparagraph (b)  until the                                                               
legislature is presented  with enough evidence to  prove that the                                                               
over-the-top route is in the state's best interest.                                                                             
                                                                                                                                
Number 2140                                                                                                                     
                                                                                                                                
REPRESENTATIVE   GREEN  asked   whether  Mr.   Griffin's  concern                                                               
regarding subsection (b) is that  "without this indication of 'to                                                               
market'" it could jeopardize or  preclude a line, say, from Point                                                               
Thomson,  which  would  be  onshore  but  would  very  likely  be                                                               
handling gas.                                                                                                                   
                                                                                                                                
MR. GRIFFIN responded:                                                                                                          
                                                                                                                                
     I would not  see the language, as I proposed  it, as in                                                                    
     any way  prohibiting development of Point  Thomson gas,                                                                    
     unless  for some  reason it  was necessary  to run  the                                                                    
     Point  Thompson pipeline  immediately  adjacent to  the                                                                    
     Beaufort Sea or off the coast of the North Slope.                                                                          
                                                                                                                                
REPRESENTATIVE GREEN clarified that his  concern was with the way                                                               
(b) is  written now.   He  asked Mr. Griffin  if his  concern was                                                               
that  the result  of passing  the bill  without the  modification                                                               
under discussion  would be to  jeopardize "shipping  gas adjacent                                                               
to the shoreline."                                                                                                              
                                                                                                                                
MR. GRIFFIN  replied that the  concern centered  around arguments                                                               
that  might be  raised under  the commerce  clause and  the equal                                                               
protection  clause for  a gas  project that  fits the  definition                                                               
currently in subsection (b), whether  that project involved Point                                                               
Thomson or Prudhoe Bay.                                                                                                         
                                                                                                                                
Number 2235                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN continued his line of questioning:                                                                         
                                                                                                                                
     It may  ... seem foolish  now, but it's  possible, with                                                                    
     the gas  accumulation at Point Thomson,  there could be                                                                    
     significantly more gas in that  immediate area that may                                                                    
     ultimately prove better  to go east and  still have the                                                                    
     Prudhoe  Bay gas  [in] a  pipeline coming  down through                                                                    
     the state.                                                                                                                 
                                                                                                                                
     And so  I'm wondering  if, because of  the way  this is                                                                    
     written,   would    that   preclude    Point   Thomson,                                                                    
     subsequently to a  gas line coming through  the state -                                                                    
     subsequent development  at Point Thompson -  going east                                                                    
     and  down the  Mackenzie?   Would (b)  prevent that  as                                                                    
     it's written now?                                                                                                          
                                                                                                                                
MR. GRIFFIN responded that he believed it would.                                                                                
                                                                                                                                
Number 2296                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA  pinpointed that the new  language of Mr.                                                               
Griffin's  proposed   amendment  preserves  the  intent   of  the                                                               
original  legislation,  uses  general rather  specific  language,                                                               
does  not interfere  with any  other projects,  and protects  the                                                               
right to  have offshore pipelines.   She described  Mr. Griffin's                                                               
amendment as  an effort to "get  away from an attack  on the face                                                               
of the legislation."  She asked Mr. Griffin to confirm that.                                                                    
                                                                                                                                
MR. GRIFFIN concurred, saying he  was trying to avoid a potential                                                               
"facial"  challenge to  the bill,  based on  either the  commerce                                                               
clause or an equal protection argument.                                                                                         
                                                                                                                                
REPRESENTATIVE  KERTTULA   asked  Mr.  Griffin  to   confirm  the                                                               
following statement:                                                                                                            
                                                                                                                                
     Without this  language, ... if  you were a  company and                                                                    
     you  were   seeking  ...  an  alternative   route,  you                                                                    
     wouldn't even have  to come in and apply  for a permit,                                                                    
     potentially.   You  could just  go  straight to  court.                                                                    
     You'd never even have to  come through and try, because                                                                    
     you'd already be foreclosed.                                                                                               
                                                                                                                                
MR. GRIFFITH answered that it could be a risk.                                                                                  
                                                                                                                                
Number 2370                                                                                                                     
                                                                                                                                
SENATOR TORGERSON  offered excerpts  of a  legal opinion  that he                                                               
said was "on point" to  Mr. Griffin's memo to another legislator.                                                               
He said he would supply copies  to members of the House Resources                                                               
Standing  Committee  only,  for   confidentiality  reasons.    He                                                               
mentioned  the  significance  of the  federal  government  having                                                               
spoken in  regard to the gas  pipeline issue, and how  SB 164 and                                                               
the objectives of federal policy  are congruent, according to the                                                               
author of  the letter.   Senator Torgerson  added that  he didn't                                                               
think  Mr.  Griffin believed  in  the  fundamental policies  that                                                               
this legislature was trying to set.                                                                                             
                                                                                                                                
Number 2440                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA  asked  Senator Torgerson  what  adverse                                                               
effect would  come from  adopting Mr.  Griffin's amendment.   She                                                               
also asked whether  it wouldn't be preferable  to "give ourselves                                                               
the chance to stand up to that kind of a legal challenge?"                                                                      
                                                                                                                                
SENATOR  TORGERSON   replied  that   the  language   without  the                                                               
amendment was very clear and he liked it.                                                                                       
                                                                                                                                
REPRESENTATIVE  KERTTULA made  a  motion to  adopt Mr.  Griffin's                                                               
amendment.    She explained  that  she  didn't believe  it  would                                                               
change the  intent of "this very  good idea."  Instead,  she told                                                               
members, it  "protects us against  facial challenges, puts  us on                                                               
better  footing in  the  courts,  and, with  due  respect to  the                                                               
sponsor, ... [follows] very good legal advice."                                                                                 
                                                                                                                                
SENATOR TORGERSON reiterated that he opposed it.                                                                                
                                                                                                                                
Number 2604                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  called an at-ease.   She called the  meeting back                                                               
to order.                                                                                                                       
                                                                                                                                
A roll  call vote  was taken.   Representative Kerttula  voted in                                                               
favor of  the amendment.  Representatives  Fate, Chenault, Green,                                                               
McGuire,   Stevens,  Masek,   and   Scalzi   voted  against   it.                                                               
[Representative Kapsner  was absent.]   Therefore,  the amendment                                                               
failed by a vote of 1-7.                                                                                                        
                                                                                                                                
Number 2660                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  moved to  report HCS  SB 164(O&G)  out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There being  no objection,  HCS SB  164(O&G) was                                                               
moved out of the House Resources Standing Committee.                                                                            

Document Name Date/Time Subjects