Legislature(2001 - 2002)
04/11/2001 01:10 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.