Legislature(2007 - 2008)BARNES 124

04/21/2007 01:00 PM RESOURCES


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01:04:12 PM Start
01:04:30 PM HB177
04:24:29 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 4/20/07 --
+= HB 177 NATURAL GAS PIPELINE PROJECT TELECONFERENCED
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
HB 177-NATURAL GAS PIPELINE PROJECT                                                                                           
                                                                                                                                
1:04:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  announced that the  only order of  business would                                                               
be HOUSE  BILL NO. 177,  "An Act  relating to the  Alaska Gasline                                                               
Inducement Act;  establishing the  Alaska Gasline  Inducement Act                                                               
matching  contribution  fund;  providing for  an  Alaska  Gasline                                                               
Inducement  Act coordinator;  making  conforming amendments;  and                                                               
providing for an effective date."   [CSHB 177(O&G) was before the                                                               
committee.]                                                                                                                     
                                                                                                                                
1:05:52 PM                                                                                                                    
                                                                                                                                
GEORGE  BERRY said  that  recently he  read  that Governor  Palin                                                               
enjoys an 83 percent approval  rating, which he opined means that                                                               
her form  of government  is that  which the  people desire.   Mr.                                                               
Berry said that the Alaska  Gasline Inducement Act (AGIA) is most                                                               
welcome to him  for it clearly and definitively  places a gasline                                                               
proposal on the table for a  fair and open assessment by citizens                                                               
as  well as  legislators.   He noted  that recently  an Anchorage                                                             
Daily  Newspaper   article  by   former  Governor   Wally  Hickel                                                             
discussed  the state's  rights in  relation  to the  oil and  gas                                                               
leaseholders.  Mr. Berry stressed  that his message today is that                                                               
representatives need to  use the state's leverage  at its highest                                                               
level.   The  AGIA legislation  is the  best way  to get  the gas                                                               
players to the table.  He  then recalled recent testimony from BG                                                               
Gas,  a worldwide  gas transmission  producer, that  related that                                                               
third  party owners  of a  gas transmission  line is  more common                                                               
than  producer  ownership.    He  opined  that  the  third  party                                                               
pipeline owner  is more interested  in production  and throughput                                                               
versus producers who don't generally  hold those same ideals.  In                                                               
regard  to changes  and amendments  to  HB 177,  a project  labor                                                               
agreement would be a very positive amendment as it will ensure                                                                  
local hire of Alaskan residents.                                                                                                
                                                                                                                                
1:09:21 PM                                                                                                                    
                                                                                                                                
MR. BERRY, in conclusion, stated his support of AGIA and                                                                        
requested that the committee move it forward this session.                                                                      
                                                                                                                                
1:09:39 PM                                                                                                                    
                                                                                                                                
MIKE LITTLEFIELD, Business Agent, Teamsters Local 959,                                                                          
paraphrased from the following written testimony:                                                                               
                                                                                                                                
     Teamsters  Local  959  represents  5000  active  and/or                                                                    
     retired members  throughout the state of  Alaska.  Many                                                                    
     of our members  worked untold hours some  years ago, to                                                                    
     construct  the oil  pipeline.   We  still have  members                                                                    
     working  on the  North Slope  or in  Slope-related jobs                                                                    
     within the oil industry.                                                                                                   
                                                                                                                                
     For over  thirty years  we have  discussed construction                                                                    
     of a gas pipeline here in  Alaska.  Many of our members                                                                    
     planned on  going from their  oil construction  jobs to                                                                    
     gas-related jobs;  however, to date, the  majority have                                                                    
     given up on that idea.                                                                                                     
                                                                                                                                
     The previous administration negotiated  a deal with the                                                                    
     oil  producers, which  was brought  to the  legislative                                                                    
     body last year.   As all of you are  aware, that effort                                                                    
     failed.                                                                                                                    
                                                                                                                                
     Before  you  this  afternoon  is  HB  177,  the  Alaska                                                                    
     Gasline Inducement  Act or AGIA, presented  by Governor                                                                    
     Palin and her new  administration.  Teamsters Local 959                                                                    
     would like to go on  record thanking Governor Palin and                                                                    
     her team  for the hard  work put  in thus far  on AGIA,                                                                    
     which  we believe  may be  the necessary  framework for                                                                    
     construction of a gas pipeline in Alaska.                                                                                  
                                                                                                                                
     Some   say  AGIA   is  a   huge  risk,   destroying  an                                                                    
     opportunity for an Alaska gas  line.  Some say the bill                                                                    
     favors  the  pipeline  builders  rather  than  the  gas                                                                    
     owners.    Some even  say  the  state should  not  tell                                                                    
     bidders what to bid.   Those of us representing workers                                                                    
     believe that  AGIA may  well be  the vehicle  needed to                                                                    
     move the gas pipeline project closer to reality.                                                                           
                                                                                                                                
     In our view,  AGIA is a tool for Governor  Palin to use                                                                    
     while doing her  job in leading our state,  just as our                                                                    
     members need tools to perform  their jobs on day-to-day                                                                    
     basis.   The governor  and her  staff have  presented a                                                                    
     very  aggressive  schedule that  contains  quantifiable                                                                    
     results.                                                                                                                   
                                                                                                                                
     The  previous  committee  and the  governor  should  be                                                                    
     applauded  for including  a commitment  to negotiate  a                                                                    
     project labor agreement  in HB 177 as well.   We do not                                                                    
     believe  any pipeline  company  would  disagree that  a                                                                    
     project labor agreement (or PLA)  is not justifiable on                                                                    
     a construction project  of such magnitude.   With a PLA                                                                    
     in place, we will be  able to define the training needs                                                                    
     of workers,  legally require local hire  through hiring                                                                    
     halls, and  define wages, hours and  working conditions                                                                    
     to  assure stability  during the  construction of  this                                                                    
     project.   We thank  Governor Palin  and her  staff for                                                                    
     their efforts  in this area.   Additionally, we request                                                                    
     the  committee include  a definition  of Project  Labor                                                                    
     Agreement, that would support  the language included in                                                                    
     the CS for SB 104 Judiciary Committee.                                                                                     
                                                                                                                                
     As  you  continue  your  committee  work  on  the  AGIA                                                                    
     legislation, please remember the  gas pipeline is vital                                                                    
     to the future  economic growth of this state.   Here is                                                                    
     a window of  opportunity for us to move  forward.  Such                                                                    
     opportunity  will  not  last forever.    Give  Governor                                                                    
     Palin the tools she needs  to perform her job on behalf                                                                    
     of all Alaskans.  Support the passage of HB 177.                                                                           
                                                                                                                                
1:13:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO announced that he expects this legislation to                                                                    
reach the House Finance Committee this week and the goal is for                                                                 
the legislation to be passed out by the end of session.                                                                         
                                                                                                                                
1:14:03 PM                                                                                                                    
                                                                                                                                
PETER  CAPTAIN, SR.,  Vice President,  Tanana Chiefs  Conference,                                                               
informed   the  committee   that  recently   the  Tanana   Chiefs                                                               
Conference  (TCC) passed  a resolution  supporting  an AGIA  PLA,                                                               
which he read.                                                                                                                  
                                                                                                                                
1:17:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO turned to the  issue of the Alaska hire preference                                                               
provision in  HB 177.   He offered that  there will be  many good                                                               
jobs  after  the  pipeline is  constructed  and  delivering  gas.                                                               
Therefore,  he requested  that people  are trained  for long-term                                                               
jobs  after the  construction is  complete.   He highlighted  the                                                               
various aspects of the project  requiring workers from management                                                               
to workers at  the gas treatment plant.  The  goal, he opined, is                                                               
to fill as many of the positions with Alaskans.                                                                                 
                                                                                                                                
1:19:17 PM                                                                                                                    
                                                                                                                                
JOHN CORBETT,  Laborers Local 942, testified  in support Governor                                                               
Palin's AGIA amendment to include  a PLA, which means locals will                                                               
go to work  first and be the  last to be laid  off.  Furthermore,                                                               
it means that  the wages he earns could be  put back into Alaska.                                                               
He related  his goal to  be able to build  a house and  raise his                                                               
family in Alaska.                                                                                                               
                                                                                                                                
1:20:55 PM                                                                                                                    
                                                                                                                                
SAMANTHA  FONOTI, Laborers  Local 942,  noted her  agreement with                                                               
Mr. Corbett's testimony.                                                                                                        
                                                                                                                                
1:22:23 PM                                                                                                                    
                                                                                                                                
ERIC FONTENOT,  Laborers Local 942,  informed the  committee that                                                               
he  has been  living in  Alaska for  the last  seven years  after                                                               
initially  arriving with  the U.S.  Army.   He recalled  his time                                                               
working with "NorConn" and the  discussions he has heard relating                                                               
that attempts  to get a gasline  have been going on  for the last                                                               
30  years.   Mr.  Fontenot  opined that  a  gasline  needs to  be                                                               
constructed for more than just the  jobs it will create, but also                                                               
for the  gas Alaskans  could use.   Furthermore, a  gasline could                                                               
reduce the strain on Alaska's economy.                                                                                          
                                                                                                                                
1:25:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO thanked  Mr. Fontenot for his service  in the U.S.                                                               
Army.   He then explained that  the gas has constantly  been used                                                               
to reinject into the ground to  push the oil out.  Therefore, the                                                               
gas has been  useful and has pushed the life  of Prudhoe Bay from                                                               
20 years  to 30 years.   At this  point, the  gas is ready  to be                                                               
shipped.   Co-Chair  Gatto expressed  his hope  that within  five                                                               
years the gas will be in the line.                                                                                              
                                                                                                                                
1:26:28 PM                                                                                                                    
                                                                                                                                
DIRK TAYLOR, Laborers Local 942,  related his support for HB 177.                                                               
He  said this  legislation [will  result] in  a lot  of jobs  for                                                               
people living  [in Alaska] who will  put the money back  into the                                                               
state's economy.   Furthermore, Alaskans will take  pride in this                                                               
job, pride that those in the Lower 48 won't necessarily have.                                                                   
                                                                                                                                
1:27:39 PM                                                                                                                    
                                                                                                                                
JACOB HOWDESHELL,  Laborers Local  942, noted his  agreement with                                                               
Mr. Taylor's  testimony and  the amendment to  AGIA.   He opined,                                                               
"It will be long-term economic  solution putting trade workers to                                                               
work, not  just in  the construction but  in the  maintenance and                                                               
the operations."                                                                                                                
                                                                                                                                
1:28:15 PM                                                                                                                    
                                                                                                                                
EMALY  SPENCER,  Laborers  Local  942, testified  in  support  of                                                               
Governor Palin's  [proposal] because it provides  jobs that allow                                                               
her to  support her  children and  work for  her children  in the                                                               
future.                                                                                                                         
                                                                                                                                
1:29:29 PM                                                                                                                    
                                                                                                                                
ROBERT PURCELL, Laborers  Local 942, opined that  through the PLA                                                               
in AGIA  much more community  building through jobs  will result.                                                               
Mr. Purcell  related, "It  means a lot  to me to  be able  to say                                                               
that I'm  an apprentice in  a laborer's program and  that they're                                                               
going to give me the training that  I'm going to need not only to                                                               
help with the pipeline but also  to work in future jobs that come                                                               
after work."   He highlighted that  it's important to be  able to                                                               
provide  for his  children  and  also have  a  pension plan  that                                                               
allows him  to be  able to  retire.   In conclusion,  Mr. Purcell                                                               
stated his support for the PLA in AGIA.                                                                                         
                                                                                                                                
1:30:49 PM                                                                                                                    
                                                                                                                                
BRYAN LINT, Laborers  Local 942, testified in support  of the PLA                                                               
in AGIA.   He expressed the need for the  pipeline to go through.                                                               
Mr.  Lint related  that all  the training  in the  apprenticeship                                                               
program is helping him  and he would like to be  able to use that                                                               
knowledge at work.                                                                                                              
                                                                                                                                
1:32:21 PM                                                                                                                    
                                                                                                                                
JERRY WALKER provided the following testimony:                                                                                  
                                                                                                                                
     I, respectfully address you today  as an individual who                                                                    
     is proud  to have lived  and worked in the  great state                                                                    
     of  Alaska for  18 years.    I am  appreciative of  the                                                                    
     administration's     efforts    and     your    careful                                                                    
     considerations  to  be   responsible  stewards  of  our                                                                    
     resources.   I remind you  today of one  very important                                                                    
     theme  and  from  that  ask  four  questions  for  your                                                                    
     careful  consideration as  you  continue this  critical                                                                    
     process.  The  theme is the free  enterprise system and                                                                    
     state government's role within.                                                                                            
                                                                                                                                
     Question 1)  Is the purpose  of AGIA [to]  enhance your                                                                    
     role  as legislators  to induce  private enterprise  by                                                                    
     providing $500  billion in their  risk-reward analysis?                                                                    
     Or, should it merely be  to ensure an open for business                                                                    
     environment   that   is    characterized   by   minimal                                                                    
     interference?  Please  consider being less prescriptive                                                                    
     and  more  general  in your  objectives  for  your  bid                                                                    
     requirements.                                                                                                              
                                                                                                                                
     Question 2)  Who best can  evaluate risk  and potential                                                                    
     reward, private  enterprise or  state government?   If,                                                                    
     as legislators,  you want to  evaluate risk,  I suggest                                                                    
     you  focus  on  how  we,  as a  state,  deal  with  the                                                                    
     probable  negative   growth  without   individuals  and                                                                    
     companies willing  to invest required capital.   Please                                                                    
     ... consider  being less prescriptive and  more general                                                                    
     in your objectives for bid requirements.                                                                                   
                                                                                                                                
     Question 3)  Is the  real question of  fiscal stability                                                                    
     more  important  ...  for  potential  shippers  of  our                                                                    
     natural  resources that  we as  a state  have sold  and                                                                    
     hope  to sell  more  of?   Or, should  it  be for  both                                                                    
     current and  future generations of Alaska  to determine                                                                    
     how we can pay for  expected services?  Please consider                                                                    
     fixing severance tax rates  that will prompt investment                                                                    
     in Alaska.                                                                                                                 
                                                                                                                                
     Question 4)  Do we really  think we can  expect current                                                                    
     and future  owners of our natural  resources to compete                                                                    
     in a  global marketplace when, under  the proposed bill                                                                    
     two  commissioners  will  be responsible  to  pick  the                                                                    
     winner?   Please consider  allowing for  more proposals                                                                    
     that  will encourage  more competition  in our  project                                                                    
     such that  the ultimate winner will  be better prepared                                                                    
     to  compete globally,  and  hence  provide more  fiscal                                                                    
     stability  to  Alaskans for  many  years  to come.    I                                                                    
     respect  your  commitment   to  Alaskans,  present  and                                                                    
     future.   I  thank you  for your  careful consideration                                                                    
     and  request  your   responsible  action  and  ultimate                                                                    
     decision to this bill in  this legislative session that                                                                    
     is ... soon to expire.                                                                                                     
                                                                                                                                
1:35:46 PM                                                                                                                    
                                                                                                                                
JAY  QUAKENBUSH, President,  Fairbanks Building  and Construction                                                               
Trades  Council,  said that  labor  organizations  in Alaska  are                                                               
poised to train  and employ Alaskans.  He opined  that a PLA will                                                               
provide  an  opportunity  to further  the  investment  of  [labor                                                               
organizations] in  the state and help  the employment application                                                               
of this job,  which provides the pipeline licensee  and the state                                                               
assurity  that the  pipeline  will  be built  on  time and  under                                                               
budget.  In response to  Co-Chair Gatto, Mr. Quakenbush confirmed                                                               
that a PLA  wouldn't restrict laborers to be union  members.  The                                                               
laborers  on the  project would  be working  under the  terms and                                                               
conditions of a  bargaining agreement as would  any other laborer                                                               
on the project.   Therefore, non-union members  could possibly be                                                               
working for the same wage as  union members.  In further response                                                               
to Co-Chair Gatto, Mr. Quakenbush  confirmed that these non-union                                                               
laborers  would be  required  to  pay union  dues  that would  go                                                               
towards  the   laborer's  representation  under   the  collective                                                               
bargaining agreement.                                                                                                           
                                                                                                                                
1:39:13 PM                                                                                                                    
                                                                                                                                
DANIEL FIRMIN, Laborers  Local 942, noted his  agreement with the                                                               
others  who have  testified  [from the  Laborers  Local 942]  and                                                               
stated his agreement with the amendment to AGIA.                                                                                
                                                                                                                                
1:39:57 PM                                                                                                                    
                                                                                                                                
GERALD KW BROWN applauded the  effort and work that the committee                                                               
puts into  these meetings.   He then  noted his agreement  that a                                                               
PLA is  a very important  part of the process.   He said  that he                                                               
sent  all the  committee  members an  email  of some  observation                                                               
points he  had after hearing  Marty Massey's testimony,  which he                                                               
said took  him aback.  It  seems that the three  [companies] that                                                               
have control of the gas don't  really want to participate in this                                                               
process.   He expressed hope  that some  kind of fairness  in how                                                               
the  gas from  the North  Slope is  distributed can  be achieved.                                                               
Whether  the   aforementioned  is   part  of  AGIA   or  separate                                                               
legislation,  it needs to be  reviewed, he opined.  In fact, [the                                                               
state] may need  to mandate some release of the  gas on an annual                                                               
process.  Mr.  Brown mentioned that he was very  impressed by Mr.                                                               
Keanan's  testimony   and  his  third  party   observation.    He                                                               
expressed  hope  that   the  committee  saw  the   need  for  the                                                               
production of  gas and the  demand that  will result.   Mr. Brown                                                               
said, "I  hope that AGIA does  give a fair, balanced  approach to                                                               
distributing gas  from Alaska."   In conclusion, Mr.  Brown urged                                                               
that the committee pass HB 177.                                                                                                 
                                                                                                                                
1:43:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO clarified  that AGIA  is legislation  that simply                                                               
allows the state  to find someone who will be  called a licensee,                                                               
who will then have the most to  do with moving the gas to market.                                                               
The legislature's  work is  done when it  finishes with  AGIA and                                                               
develops a structure  from which the administration  can select a                                                               
licensee.                                                                                                                       
                                                                                                                                
1:44:46 PM                                                                                                                    
                                                                                                                                
MR. BROWN  turned to  the issue  of those who  work on  the North                                                               
Slope, but  reside outside of  the state.   He suggested  a state                                                               
income tax  might encourage people  to be residents in  the state                                                               
because the tax refund could be tailored to residency.                                                                          
                                                                                                                                
1:45:58 PM                                                                                                                    
                                                                                                                                
JERRY MEHLBERG began  by informing the committee  that he retired                                                               
after  working  20  years  in  the oil  industry  on  the  Alaska                                                               
pipeline.    He further  informed  the  committee  that he  is  a                                                               
mechanical administrator  and a licensed journeyman  plumber.  He                                                               
related  his  support of  some  type  of  inducement to  get  the                                                               
gasline built and  in operation.  Mr. Mehlberg then  said that he                                                               
has developed  a long-range  concept that  will make  much better                                                               
use of  the $500 million incentive.   He opined that  his concept                                                               
would  dovetail  with  Governor   Palin's  commitment  to  reduce                                                               
greenhouse  gases;  place  the Railbelt  [communities]  and  most                                                               
other  electric  utilities  on a  common  state  strategy;  would                                                               
probably  eliminate  the  need  for  construction  of  coal-fired                                                               
plants, as  is being discussed for  the Matanuska-Susitna Valley;                                                               
reduce  electrical  costs  for   everyone;  and  would  help  the                                                               
producers  maintain oil  production while  providing them  a good                                                               
economic  and environmental  incentive.   Mr. Mehlberg  said that                                                               
his plan  is comprehensive, and  therefore he inquired as  to who                                                               
he should talk to about his plan.                                                                                               
                                                                                                                                
1:47:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO suggested that the House Special Committee on                                                                    
Ways and Means would be the appropriate venue for such.                                                                         
                                                                                                                                
1:48:24 PM                                                                                                                    
                                                                                                                                
JERRY MCCUTCHEON began by indicating that Co-Chair Gatto should                                                                 
apologize to those whom he has lead to believe that there will                                                                  
be a gasline.  He then provided the following testimony:                                                                        
                                                                                                                                
     The legislature  and the Governor  Palin have  not been                                                                    
     honest with  the public.   They have led the  public to                                                                    
     believe there's  going to be  a gasline when,  in fact,                                                                    
     there will  not be a  gasline.  Palin's  press released                                                                    
     that she was not going  to lobby the legislature on her                                                                    
     gasline  legislation outside  of  her staff  repeatedly                                                                    
     cherry-picking, misleading  information to give  to the                                                                    
     legislature and  the public.   I doubt if  her lobbying                                                                    
     the legislature  would do much good;  they have already                                                                    
     served notice  that they are  going to take  their time                                                                    
     and do  it their way.   I think Palin has  finally come                                                                    
     to the  conclusion she cannot  obtain any  semblance of                                                                    
     an  open  season, thus  no  hope  of  a gasline.    The                                                                    
     outcome  for Palin's  gasline  is  nil to  nonexistent.                                                                    
     The  most  damaging   presentation  occurred  when  the                                                                    
     exasperated   Senator   French,  chairman   of   Senate                                                                    
     Judiciary,  said and  asked of  Cathy  Forester of  the                                                                    
     [Alaska] Oil  and Gas Conservation Commission  after he                                                                    
     could not get her to give  him any amount of gas or any                                                                    
     time the  gas could  be available.   ...   French said,                                                                    
     "Well, we  still have  the 2.7  bcfd."   Cathy replied,                                                                    
     "Somebody would have  to apply to the  [Alaska] Oil and                                                                    
     Gas Conservation Commission for  that 2 bcfd offtake or                                                                    
     some portion of  it and the AOGCC would  have to rehear                                                                    
     the Rule  9, the 2.7  bcfd and after the  hearing there                                                                    
     would be no  gas available."  Thus,  the once available                                                                    
     gas,  for  at least  the  last  20  years, Rule  9  gas                                                                    
     offtake of 2.7  bcfd is now nonexistent.   It exists on                                                                    
     paper only  and if you  try to  apply for it,  it isn't                                                                    
     going to  be there.   There is  no gas available  for a                                                                    
     gasline,  nor is  there any  indication  of when  there                                                                    
     will be  gas available  for a gasline,  if ever.   And,                                                                    
     I'll  bet   on  the   later.    Having   predicted  the                                                                    
     disappearance of the  2.7 bcfd ever since  it was first                                                                    
     allowed,  I  will  predict  that   the  2.7  bcfd  will                                                                    
     disappear  again  in  10  years,  in  20  years.    The                                                                    
     illusion of a gas offtake  for a gasline will always be                                                                    
     like chasing  a rainbow, it  will always be  just ahead                                                                    
     and never there when one  gets to where they thought it                                                                    
     was.  The  gas offtake is like a mirage,  just over the                                                                    
     hill but never there.  Every  time it comes to take the                                                                    
     gas, the reservoir  will have to be evaluated  as if it                                                                    
     were a new  discovery and a new discovery  with all the                                                                    
     infrastructure in place.  And,  we will always be faced                                                                    
     with the  need for the  gas for oil production.   Palin                                                                    
     was cognizant of the need  for the rehearing of the 2.7                                                                    
     bcfd gas  offtake.   She was  chairman of  the [Alaska]                                                                    
     Oil  and Gas  Conservation  Commission,  she must  have                                                                    
     known what the outcome of  a rehearing would be.  Palin                                                                    
     just  tried  to  scammer  through   in  hope  that  the                                                                    
     legislature would not find out ...                                                                                         
                                                                                                                                
1:52:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO interrupted  Mr. McCutcheon to inform  him that he                                                               
had to conclude his testimony in the next few seconds.                                                                          
                                                                                                                                
1:52:50 PM                                                                                                                    
                                                                                                                                
MR. MCCUTCHEON  opined that he has  a right to be  heard and that                                                               
the courts would  uphold that he has  a right to be  heard by the                                                               
legislature as well as the public.                                                                                              
                                                                                                                                
CO-CHAIR GATTO explained that Mr.  McCutcheon needed to summarize                                                               
his comments  as every witness has  a certain amount of  time due                                                               
to the many who want to speak.                                                                                                  
                                                                                                                                
MR. MCCUTCHEON  said that if  this legislation ends up  in court,                                                               
he  would be  present and  give the  co-chair the  opportunity to                                                               
testify as  to why  he didn't  allow [folks to  heard].   He then                                                               
reiterated his  right to be  heard [by the  court] as well  as by                                                               
the public.   He  then emphasized that  there's a  big difference                                                               
between  [the court]  and the  legislature  taking testimony  and                                                               
burying it somewhere.                                                                                                           
                                                                                                                                
1:53:20 PM                                                                                                                    
                                                                                                                                
PAUL LAIRD,  General Manager,  Alaska Support  Industry Alliance,                                                               
paraphrased  from  the   following  written  testimony  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Our  400-plus member  companies provide  the goods  and                                                                    
     services  that  make  Alaska's   oil,  gas  and  mining                                                                    
     industries  possible,  and  provide  more  than  30,000                                                                    
     Alaskan jobs.                                                                                                              
                                                                                                                                
     First and  foremost, the Alliance  wants a  gas project                                                                    
     ...  sooner rather  than later,  and with  the greatest                                                                    
     long-term  benefits for  the State  of Alaska,  Alaskan                                                                    
     workers,  Alaskan  businesses   and  all  Alaskans.  We                                                                    
     believe  this  act  will  fail   in  its  objective  of                                                                    
     achieving  a gas  project unless  key changes  are made                                                                    
     prior to passage:                                                                                                          
                                                                                                                                
     First, bid  requirements set  out in  the bill  are too                                                                    
     prescriptive   and  should   be  replaced   with  broad                                                                    
     objectives. Bid requirements  will limit competition in                                                                    
     the  application process.  The  prescriptive nature  of                                                                    
     the   bill  guarantees   that  creative   and  mutually                                                                    
     beneficial  approaches that  address the  state's needs                                                                    
     will  never be  explored, and  it likely  will preclude                                                                    
     some prospective applicants from participating.                                                                            
                                                                                                                                
     Second,   the  bill   places  too   much  emphasis   on                                                                    
     mitigating the  short-term financial risks  incurred by                                                                    
     the pipeline  builder and too little  on addressing the                                                                    
     much longer-term and greater  risks of gas shippers. It                                                                    
     offers  shippers  a non-binding  "trust-me"  commitment                                                                    
     for fiscal stability lasting a  fraction of the project                                                                    
     life, and does nothing to  fix severance tax rates that                                                                    
     the administration admits won't work.                                                                                      
                                                                                                                                
     Third, the  $500 million  incentive is  unnecessary. It                                                                    
     has the  potential to  turn pretenders  into contenders                                                                    
     for a state license,  and we're skeptical about placing                                                                    
     Alaska's  future  into the  hands  of  any entity  that                                                                    
     requires  a  $500  million  contribution  in  order  to                                                                    
     pursue a  $30 billion project. Applicants  that need to                                                                    
     be  "bought" with  the $500  million may  not be  worth                                                                    
     acquiring.                                                                                                                 
                                                                                                                                
     We're  also concerned  about  provisions mandating  the                                                                    
     use of rolled-in tariff  rates for pipeline expansions,                                                                    
     establishing  a   virtual  monopoly  for   the  state's                                                                    
     licensee  at the  possible expense  of other  qualified                                                                    
     projects and allowing a pair  of commissioners too much                                                                    
     leeway in how they select a licensee.                                                                                      
                                                                                                                                
     The Alaska Gasline  Inducement Act may be  our last and                                                                    
     best  chance  to  make  a North  Slope  gas  project  a                                                                    
     reality, but only if it's  fixed before it's passed. In                                                                    
     order to  succeed, the bill must  reflect the interests                                                                    
     of Alaskans,  of the developer  and transporter  and of                                                                    
     North Slope producers and shippers. Thank you.                                                                             
                                                                                                                                
1:56:18 PM                                                                                                                    
                                                                                                                                
[Co-Chair Gatto passed the gavel to Co-Chair Johnson.]                                                                          
                                                                                                                                
PAUL KENDALL provided the following testimony:                                                                                  
                                                                                                                                
     Nearly all  things send signals, signs,  or indications                                                                    
     of things  that have  been or things  to come,  in some                                                                    
     form  of another.   You  folks,  because the  producers                                                                    
     have  sent  you  confusing,  admonishing,  conflicting,                                                                    
     minimal,  and uncertain  signals,  must  prepare for  a                                                                    
     worst  case  scenario  in  direct  proportions  to  the                                                                    
     signals  you have  received from  the producers.   This                                                                    
     makes it all the more  important that you stay focused,                                                                    
     in  the  queue,  ...  and  above  all  "The  United  as                                                                    
     Alaskans  mode  we  stand."    I  strongly,  therefore,                                                                    
     believe that you should gather  and pass the initiative                                                                    
     or whatever  it takes to  stay in session for  the rest                                                                    
     of  the year.   You  have  to pay  yourselves a  decent                                                                    
     salary  for you  and  your families.    There are  many                                                                    
     critical  details to  come and  more need  for insights                                                                    
     into  a  few more  critical  sectors,  as I  will  list                                                                    
     below.  To mention a few  of those:  The capacity needs                                                                    
     to be discussed  in totality.  The take,  the take, and                                                                    
     the  take really  needs to  be  a cautious  discussion.                                                                    
     Social   impacts   infrastructure,   tailgating   large                                                                    
     projects  such  as  Agrarium and  ARR,  the  gas  price                                                                    
     charges  to  residential users  at  a  true and  actual                                                                    
     cost.  The  Texas company purchase of  Enstar, the GTP,                                                                    
     the  coal gasification  process, hydrogen  gas, several                                                                    
     others  are in  need  of an  unhurried, methodical  and                                                                    
     professional accounting for  an awareness, testimonies,                                                                    
     and hearings.  It is  therefore, again, that I strongly                                                                    
     urge the following  in addition:  that  you contact the                                                                    
     governors  or  their  designees  of  Los  Angeles,  San                                                                    
     Francisco,  Sacramento,  Seattle, Portland,  and  other                                                                    
     leading  cities  located  south and  southwest  of  the                                                                    
     Alberta  Hub.   You should  invite their  emissaries to                                                                    
     come to  Alaska ...  for a  roundtable forum  on energy                                                                    
     needs of those  states and Alaska's role.   Because we,                                                                    
     as Alaskans, feel compelled to  reach out to our fellow                                                                    
     Americans to  see if they're  in need of  our resources                                                                    
     before we should  send them elsewhere.   The reason you                                                                    
     should do  this also is  number one:   it is  the right                                                                    
     thing to  do, it is  the honorable  thing to do,  it is                                                                    
     the American  thing to do,  it is the Alaskan  thing to                                                                    
     do, it is a smart  business decision, it is a necessary                                                                    
     component for a decision,  especially if you get forced                                                                    
     to a  co-venturing position.   Finally,  in conclusion,                                                                    
     ladies  and  gentlemen,  I  am   having  a  great  time                                                                    
     learning  so  much  about   the  gas  piping,  shipping                                                                    
     industry.  I am anxious to  see how the take is divided                                                                    
     ... and  I only regret  one thing  and that is  that no                                                                    
     one is  paying me to learn  this ....  In  closing, ...                                                                    
     this is  to the  governor, the  House, the  Senate, the                                                                    
     unforeseen and  the unseen or  unheard others  who work                                                                    
     behind  you in  support of  you, should  I forget  I am                                                                    
     enjoying  watching ...  you all  work together  for the                                                                    
     benefit of us all.  What  a great job and legacy all of                                                                    
     you are part  of it.  This process you  are involved in                                                                    
     now is, in my opinion, how  our society will need to be                                                                    
     represented  now  and on  into  the  future.   Just  as                                                                    
     Alaska is  a new frontier for  many, so it is  that you                                                                    
     all may represent the new  frontier for how our society                                                                    
     will need to be represented  by the new public servants                                                                    
     of the  future.   It has  to be  an open  and full-time                                                                    
     commitment  process called  a  job.   I  thank you  and                                                                    
     thank  you on  the behalf  of those  other people  that                                                                    
     feel the same way.  Thank you.                                                                                             
                                                                                                                                
2:01:02 PM                                                                                                                    
                                                                                                                                
AVES THOMPSON, Executive Director, Alaska Trucking Association                                                                  
(ATA), paraphrased from the following written testimony                                                                         
[original punctuation provided]:                                                                                                
                                                                                                                                
     The  Alaska  Trucking  Association   is  a  state  wide                                                                    
     organization   representing  trucking   interests  from                                                                    
     Barrow to Ketchikan  for more than 49 years.   Our more                                                                    
     than 200 members represent all  of the diverse trucking                                                                    
     operations in the state and  many associate members who                                                                    
     provide goods and services to  our industry.  On behalf                                                                    
     of ATA, I  thank you for the opportunity  to testify on                                                                    
     the subject of AGIA.                                                                                                       
                                                                                                                                
     The   highest   priority   of   the   Alaska   Trucking                                                                    
     Association is to get a  gas line built, up and running                                                                    
     and delivering Alaska's gas to  market.  We applaud the                                                                    
     Governor and  her team for promptly  presenting AGIA to                                                                    
     the legislature for their consideration.                                                                                   
                                                                                                                                
     We  believe like  others,  that AGIA  has  a chance  to                                                                    
     bring a  gas line  to fruition.   We also  believe that                                                                    
     certain changes  must be  made to make  the gas  line a                                                                    
     reality.  I  will address some of  the important issues                                                                    
     as we see them.                                                                                                            
                                                                                                                                
     Bid  requirements of  the bill  are  far too  specific.                                                                    
     The  better   approach  may   be  to   set  performance                                                                    
     specifications or expectations or  outcomes and let the                                                                    
     bidders  address  how  they will  meet  those  expected                                                                    
     outcomes.   There  may  be other  ways  to reach  these                                                                    
     mutually  beneficial  outcomes,  and  the  prescriptive                                                                    
     nature  of the  current bill  guarantees we  will never                                                                    
     hear the alternatives.                                                                                                     
                                                                                                                                
     The  bill  needs  clear   and  objective  criteria  for                                                                    
     evaluating  applications.    Some  recommendations  for                                                                    
     criteria are:                                                                                                              
                                                                                                                                
     Best financial return to the state,                                                                                        
     Lowest level of risk of delays due to lawsuits, etc,                                                                       
     Highest probability of success,                                                                                            
     Jobs, instate use of gas, etc.                                                                                             
     Expansion provisions for adding gas to the line.                                                                           
                                                                                                                                
     The  bill places  too much  emphasis on  mitigating the                                                                    
     short-term  financial risks  incurred  by the  pipeline                                                                    
     builder and too little  to address the much longer-term                                                                    
     and greater  risks of gas  shippers.   Fiscal certainty                                                                    
     is an important  issue for those that will  be asked to                                                                    
     commit  to  long  term firm  transportation  agreements                                                                    
     worth  billions  of  dollars   over  the  life  of  the                                                                    
     agreements.  Some  notion of future tax  or royalty law                                                                    
     or at least, policy must be part of the deal.                                                                              
                                                                                                                                
     As a corollary to the  previous point, we feel the $500                                                                    
     million  giveaway is  unnecessary and  imprudent as  we                                                                    
     would   like  to   see  the   successful  licensee   be                                                                    
     financially capable of making  their decisions based on                                                                    
     the  sound  economics  of the  project  rather  than  a                                                                    
     subsidy or handout from the state.                                                                                         
                                                                                                                                
     It seems  that existing  shippers should not  be forced                                                                    
     to  subsidize  new  shippers by  sharing  the  cost  of                                                                    
     pipeline  capacity  expansions.   It  would  seem  more                                                                    
     equitable  and  predictable  to provide  that  the  new                                                                    
     shippers pay the cost of expansion.                                                                                        
                                                                                                                                
     These are a  few of our concerns and I'm  sure you will                                                                    
     hear from  others today as they  share their testimony.                                                                    
     The  Alaska  Trucking  Association is  eager  for  this                                                                    
     project to  succeed and stands  ready to assist  in any                                                                    
     way to help make this dream a reality.                                                                                     
                                                                                                                                
[Co-Chair Johnson returned the gavel to Co-Chair Gatto.]                                                                        
                                                                                                                                
2:04:21 PM                                                                                                                    
                                                                                                                                
MAYNARD TAPP paraphrased from the following written testimony                                                                   
[original punctuation provided]:                                                                                                
                                                                                                                                
     I  am a  citizen of  Alaska since  1990 and  Alaskan in                                                                    
     spirit since 1954 when my  dad worked in Barrow for the                                                                    
     Coast Guard.                                                                                                               
     DO THE DEAL NOW                                                                                                            
     At Thursday's spot price for  natural gas at $7.510 per                                                                    
     MMBTU  the  states  share @12.5%  would  be  $0.94  per                                                                    
     MMBTU.                                                                                                                     
     If 1MMBTU is approximately 1,000  Cubic feet then, at a                                                                    
     production  of  4.5 Billion  Cubic  feet  per day,  the                                                                    
     state of Alaska revenues loss is $4,224,375 per day.                                                                       
     I  worked on  the  Gasline Study  from  Jan 2001  until                                                                    
     March 2002  (15 months) this study  spent approximately                                                                    
     $125MM to  get near the  end of Conceptual Design.   We                                                                    
     accomplished  a lot  during that  timeframe.   Everyone                                                                    
     worked  hard and  fast.   The  results  of that  effort                                                                    
     indicated that  the producer's  wanted to  move forward                                                                    
     with the pipeline project.                                                                                                 
     It will take any new player  at least 15 months say 450                                                                    
     days  to get  to the  point where  the producers  study                                                                    
     ended.  At  $4.2MM per  day  that  totals $1.9  billion                                                                    
     dollars  loss in  state  revenues just  to  get to  the                                                                    
     place  we are  today, close  to the  end of  Conceptual                                                                    
     Design.                                                                                                                    
     At the  same time  Prudhoe Bay production  is declining                                                                    
     at  6%  per  year   and  therefore  the  related  state                                                                    
     revenues from  the oil production  is declining  at the                                                                    
     same rate. And at the  same time competing projects and                                                                    
     technologies are moving forward.                                                                                           
     The chart I am including in  my testimony is one that I                                                                    
     attained when  working with  a world  class engineering                                                                    
     company. It is  used to help them  determine the amount                                                                    
     of contingency  used at any point  during the lifecycle                                                                    
     of  a  project.    It   is,  therefore,  a  measure  of                                                                    
     confidence  that  a  project has  regarding  known  and                                                                    
     unknown costs.  These  milestones cannot be compressed.                                                                    
     You already have two to three years of testimony.                                                                          
     Will you learn anything more  in the next 15 months and                                                                    
     $1.9 billion in lost revenues.                                                                                             
                                                                                                                                
2:06:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  inquired as  to what  Mr. Tapp  means by  "Do the                                                               
Deal Now" as he said he thought that's what is occurring now.                                                                   
                                                                                                                                
2:06:55 PM                                                                                                                    
                                                                                                                                
MR. TAPP  opined that  under AGIA  it seems  that the  process is                                                               
starting over again.  He  reiterated that most of the legislature                                                               
has  already had  two years  of testimony  and experience  on the                                                               
matter.  Therefore, he opined  that the legislature could pick up                                                               
and  negotiate under  the  last governor's  proposal.   There  is                                                               
enough  information   from  the  prior  administration   to  pull                                                               
together  a deal,  modify it,  and sign  it.   He suggested  that                                                               
doing so  could result in  an open season  within a year  or two,                                                               
rather than 36  months.  Mr. Tapp said that  he supports Governor                                                               
Palin's openness and  transparency with AGIA, but  the concern is                                                               
that 15 months will be lost.                                                                                                    
                                                                                                                                
2:08:10 PM                                                                                                                    
                                                                                                                                
ERIC   DOMPELING,  Vice   President,   Alaska  Support   Industry                                                               
Alliance,  paraphrased  from   the  following  written  testimony                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     When I  came to  Alaska 37years ago,  there was  a term                                                                    
     that doesn't get used as  much today "We don't care how                                                                    
     they  do it  outside!"   Over  the course  of those  37                                                                    
     years, things  have changed in  Alaska; we  now provide                                                                    
     roughly 20% of  the oil consumed in  the United States;                                                                    
     the  revenue  that  comes  from  that  oil  development                                                                    
     supports the state  economy.  But it was  not the State                                                                    
     that risked  the capital to  explore and  develop those                                                                    
     leases.                                                                                                                    
                                                                                                                                
     AGIA is  intended to expand  resource sales,  this time                                                                    
     the gas associated with North  Slope Oil.  Gas has been                                                                    
     produced at Prudhoe  Bay for 30 years and  in that time                                                                    
     has been  an economic  boon by maintaining  pressure at                                                                    
     Prudhoe Bay which  in turn has allowed  an additional 3                                                                    
     billion  barrels of  oil to  be produced.   Today  that                                                                    
     gas, that 8  Billion Cubic Feet of  Gas, being produced                                                                    
     with  the oil  and  reinjected everyday  is creating  a                                                                    
     handling issue and needs to be shipped to market.                                                                          
                                                                                                                                
     This   gas  project   will  be   world  class   by  any                                                                    
     definition, but we are not  alone in the development of                                                                    
     World  Class Resources.   There  is  a project  already                                                                    
     underway in  Qatar that has  1,500 trillion  cubic feet                                                                    
     of  known  reserves,  42  times   larger  then  all  35                                                                    
     trillion Cubic Feet of gas  currently producible on the                                                                    
     North Slope.   The Pipelines  are in place  the Tankers                                                                    
     are built and the expansion is moving forward.                                                                             
                                                                                                                                
     We have  heard for  years from  oil producers  that any                                                                    
     project  must compete  globally for  capital investment                                                                    
     and be  judged on the  return on the  capital invested.                                                                    
     Based on  that factor alone Construction  and expansion                                                                    
     of any  project will not be  prescribed; but determined                                                                    
     by the economics.                                                                                                          
                                                                                                                                
     The North  Slope gas project  will ultimately not  be a                                                                    
     political decision, it will be  an economic decision by                                                                    
     a  resource   leaseholder,  whether  they   have  known                                                                    
     reserves  or are  exploring  hoping  to develop  future                                                                    
     reserves.     In  a  free  market,   the  tariffs  will                                                                    
     determine if  a line gets  built or expanded.  In order                                                                    
     to  promote a  project  the States  role  should be  to                                                                    
     ensure  that the  resource owners  know what  the terms                                                                    
     and conditions  will be,  I urge you  not to  leave the                                                                    
     tax  issue   open  to   interpretation.     Open  ended                                                                    
     contracts  expose  both  sides   of  any  agreement  to                                                                    
     litigation not construction.                                                                                               
                                                                                                                                
     The efforts of Governor Palin  and her team, to advance                                                                    
     The  North   Slope  gas  project,  through   AGIA;  are                                                                    
     applauded by all Alaskans including  the members of the                                                                    
     Alliance.   However,  the Inducement  Act as  currently                                                                    
     drafted does  not include clear objective  criteria for                                                                    
     evaluating the  economics of  a project,  without those                                                                    
     economic   objectives  this   project  will   not  move                                                                    
     forward.  Attempts by  government entities to determine                                                                    
     economic  viability  do  not  have  an  enviable  track                                                                    
     record.   Let the market  decide by asking for  a "Best                                                                    
     Proposal" offer  that is open  and transparent  and can                                                                    
     be judged  by the merits  of the economics,  because in                                                                    
     the end it all comes down to the Tariff!                                                                                   
                                                                                                                                
     I spoke  earlier about Alaskan's not  caring how things                                                                    
     are  done  outside!    Today we  compete  in  a  Global                                                                    
     Market, let  us not focus  only on Alaska's  wants, but                                                                    
     focus  on how  we compete  for the  development of  our                                                                    
     resources  in that  Global arena.   The  Alaska Gasline                                                                    
     Inducement Act  may be the  best opportunity to  make a                                                                    
     North  Slope  gas  project  a  reality,  If  it  is  to                                                                    
     succeed,  the bill  must acknowledge  the interests  of                                                                    
     not only Alaskans, but those  of the project developer,                                                                    
     the  transporter  and  the North  Slope  producers  and                                                                    
     shippers.                                                                                                                  
                                                                                                                                
     Thank you for your time, this concludes my testimony.                                                                      
                                                                                                                                
2:12:04 PM                                                                                                                    
                                                                                                                                
MR. DOMPELING, in response to  Co-Chair Gatto, explained that the                                                               
Alaska Support Industry  Alliance is a trade  organization of 400                                                               
different members  representing roughly  30,000 employees  in the                                                               
state.    He  mentioned  that  the  organization  encourages  the                                                               
responsible development of Alaska's natural resources.                                                                          
                                                                                                                                
2:12:53 PM                                                                                                                    
                                                                                                                                
KEVIN KNOX related  his support of AGIA and the  PLA amendment to                                                               
it.   He opined that the  PLA will ensure that  local people will                                                               
go to work  first and be the  last to be laid  off.  Furthermore,                                                               
the wages earned [by Alaskans] will be put back into Alaska.                                                                    
                                                                                                                                
2:14:00 PM                                                                                                                    
                                                                                                                                
TAMMIE WILSON thanked  the committee for including the  PLA in HB                                                               
177.   She  then  related that  her son  has  benefited from  the                                                               
Department  of  Labor &  Workforce  Development  (DLWD) grant  to                                                               
become a  heavy diesel mechanic.   The aforementioned  will allow                                                               
her son  to immediately enter  the operators' union where  he can                                                               
make  good  wages  and  have   a  retirement  and  pension  plan.                                                               
Furthermore,  this training  will  allow him  to  build a  house,                                                               
raise a family, and spend his money in Alaska.                                                                                  
                                                                                                                                
2:16:05 PM                                                                                                                    
                                                                                                                                
JOSEPH  BOYLE, Local  942, informed  the committee  that he  is a                                                               
recent  graduate of  the Laborers  Local 942  apprentice program.                                                               
He  testified in  support of  the PLA  included in  HB 177  as it                                                               
means that he can continue working and have a future.                                                                           
                                                                                                                                
2:16:57 PM                                                                                                                    
                                                                                                                                
RON  MCPHETERS,  President,  Laborers  Local  341,  informed  the                                                               
committee that he represents 6,000  members statewide through the                                                               
District Council  of Laborers.   He urged the committee  to leave                                                               
the PLA language in HB 177.                                                                                                     
                                                                                                                                
2:18:20 PM                                                                                                                    
                                                                                                                                
MEG LUM,  Apprentice, Laborers Local 341,  informed the committee                                                               
that  she is  currently  obtaining her  trade  skills during  her                                                               
apprenticeship  program.   She  related  her  excitement for  the                                                               
gasline,  which she  hoped will  be  a source  of employment  for                                                               
those reinvesting  income in the state.   Ms. Lum said  that AGIA                                                               
must include a  PLA, which will ensure Alaska hire  on one of the                                                               
most important  projects that Alaska  has seen.  She  opined that                                                               
Alaska's economy can be kept  strong and apprentices like herself                                                               
can be kept in  the state with the security of  a decent wage and                                                               
benefits.  She then related that  she looks forward to working on                                                               
the gasline to  maintain her independence as a  single mother and                                                               
taxpayer.  She concluded by  encouraging the committee to enforce                                                               
the PLA in AGIA.                                                                                                                
                                                                                                                                
2:19:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  pointed out that another  committee made a                                                               
change in the  PLA such that a pipeline applicant  is required to                                                               
use the  DLWD's job centers  and Internet hiring program,  to the                                                               
extent  practical.    He  asked  if  using  the  in-state  hiring                                                               
processes is detrimental to the PLA.                                                                                            
                                                                                                                                
MS. LUM said that she wasn't familiar with that.                                                                                
                                                                                                                                
2:20:23 PM                                                                                                                    
                                                                                                                                
TIM  SHARP,   Business  Manager,   Alaska  District   Council  of                                                               
Laborers, began  by addressing Representative  Seaton's question.                                                               
He  informed the  committee  that  when the  Fort  Knox Mine  was                                                               
built, people  from the Lower  48 were instructed to  go directly                                                               
to the job  service centers to sign up and  inform personnel that                                                               
they had been  in Alaska for a  month and intended to  stay.  The                                                               
aforementioned  meant  that  such individuals  [were  considered]                                                               
Alaskan residents and  were then referred to the  Fort Knox Mine.                                                               
Therefore, Mr. Sharp  opined that such a  requirement isn't going                                                               
to  threaten  the PLA,  but  it  threatens  the goal  of  putting                                                               
Alaskans  to  work  first  and  keeping them  to  the  end.    He                                                               
highlighted   that  previous   testimony  has   illustrated  that                                                               
Laborers Local  341 and 942  have over  60 years of  training and                                                               
putting Alaskans  to work in Alaska.   Mr. Sharp said  that he is                                                               
present to support  the governor in getting the gas  to market as                                                               
well as  Alaskans building  the pipeline.   He then  reminded the                                                               
committee  that  the  constitutional  definition  of  an  Alaskan                                                               
resident is  30 days, with  the intent to stay.   The PLA  is the                                                               
only way to legally raise the  bar in defining legal residency in                                                               
Alaska.   The  Alaska  District Council  of  Laborers only  allow                                                               
folks  to sign  up on  the hiring  hall list  [after one  year in                                                               
state.]   The aforementioned increases the  good outcome allowing                                                               
Alaskans  to go  to work  on these  projects.   Furthermore, [the                                                               
PLA]  allows  the building  and  construction  trades to  perform                                                               
training.   He noted that  it takes three  to five years  to turn                                                               
out journeyman.   With  regard to legacy  jobs, Mr.  Sharp opined                                                               
that  a properly  crafted PLA  with legacy  jobs and  Alaska hire                                                               
requirements  in  mind  could  be  beneficial  in  the  long-term                                                               
outlook.  He highlighted that  oil companies are on record saying                                                               
that the  [pipeline can't be  built] without organized  labor and                                                               
organized labor  has said it  can't be done  without a PLA.   Mr.                                                               
Sharp specified that he doesn't want  to slow AGIA down, but does                                                               
want to maximize the benefit to Alaskans.                                                                                       
                                                                                                                                
2:24:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON requested that  Mr. Sharp obtain the Senate                                                               
Judiciary  Standing Committee's  language change  to the  PLA and                                                               
email the committee his comments.                                                                                               
                                                                                                                                
MR. SHARP agreed to do so.                                                                                                      
                                                                                                                                
2:25:40 PM                                                                                                                    
                                                                                                                                
LISA PEGER  began by saying  that she is representing  The Common                                                               
Sense  Activist Party,  of which  she is  the only  member.   Ms.                                                               
Peger said that she supports HB  177.  However, she cautioned the                                                               
committee with  regard to  the consolidation  of power  such that                                                               
it's placed  in the hands  of only one or  two people.   She then                                                               
expressed the  need for competition  such that new  producers can                                                               
come on line cheaply because  competition breads efficiency.  She                                                               
pointed  to Canada  as  an example  with its  3,000  oil and  gas                                                               
producers whereas  in the U.S. basically  three producers produce                                                               
and distribute  all the  country's oil and  gas.   The producers,                                                               
she opined,  are the least  likely group  to want to  develop the                                                               
gas  line  quickly.   She  then  opined  that energy  costs  make                                                               
everything  escalate, including  the cost  of labor  and housing.                                                               
Ms.  Peger   turned  to  the  trillions  of  dollars of  gas  and                                                               
suggested that  all the problems  that producers  have identified                                                               
can be addressed.  With  regard to financial certainty, she again                                                               
reminded the  committee that this  is trillions of dollars.   She                                                               
then  suggested that  the  $500 million  inducement  could be  an                                                               
option rather than a given.                                                                                                     
                                                                                                                                
MR.  PEGER  told  the  committee that  the  state  government  is                                                               
spending $30,000  per Alaska  worker per year,  most of  which is                                                               
for  labor.   Therefore, she  suggested that  it may  be time  to                                                               
freeze  the 3  percent Consumer  Price Index  (CPI) and  any wage                                                               
hikes until the  gas is flowing.  She characterized  the CPI as a                                                               
phony thing and that educators  and government workers don't need                                                               
to be  given 3 percent more.   In conclusion, she  reiterated her                                                               
support for AGIA.                                                                                                               
                                                                                                                                
2:31:32 PM                                                                                                                    
                                                                                                                                
DAVE MCCLURE, Executive Director,  Bristol Bay Housing Authority;                                                               
Chairman, Board of Southwest  Alaska Vocational Education Center,                                                               
paraphrased  from  the   following  written  testimony  [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     I support  the CSHB  177, and  specifically, subsection                                                                    
     17  of  Section  43.90.130, which  includes  a  project                                                                    
     labor agreement  in the application process.   This PLA                                                                    
     is vital to  ensuring residents of our  region, and our                                                                    
     state,  are  hired for  the  workforce  to be  employed                                                                    
     during construction and operation of the pipeline.                                                                         
                                                                                                                                
     During  the  construction  of our  Voc  Ed  Center,  we                                                                    
     created a partnership and  project labor agreement with                                                                    
     the  trade Unions  in the  State, in  coordination with                                                                    
     Alaska Works  Partnership, which was  highly beneficial                                                                    
     to  the residents  of  the region.    The facility  was                                                                    
     completed  with   at  least   85%  local   labor,  both                                                                    
     journeyman  and apprentices.    Including that  project                                                                    
     and in  subsequent years,  we have  had over  120 local                                                                    
     folks  enrolled  in   a  general  building  maintenance                                                                    
     repair  and apprenticeship  programs, with  ten percent                                                                    
     of those folks gaining journeyman status.                                                                                  
                                                                                                                                
     I  also  support   Section  43.90.470,  concerning  job                                                                    
     training  programs.   I ask  that this  section include                                                                    
     reference  to  training  centers,  including  those  in                                                                    
     Anchorage, Fairbanks,  and the rural  regional training                                                                    
     centers such  as the Southwest  Alaska Voc  Tec Center,                                                                    
     the People's learning Center in  Bethel, the centers in                                                                    
     Kotzebue and St. Marys.                                                                                                    
                                                                                                                                
     In conclusion,  the Project Labor Agreement  and use of                                                                    
     the  training  centers  in  the  State  of  Alaska  are                                                                    
     critical and  crucial for maximizing the  use of Alaska                                                                    
     workers in this important project.                                                                                         
                                                                                                                                
2:33:11 PM                                                                                                                    
                                                                                                                                
ANDY ANDERSON, Deputy Director, Bristol Bay Housing Authority,                                                                  
paraphrased from the following written testimony [original                                                                      
punctuation provided]:                                                                                                          
                                                                                                                                
     My  statement   is  short   and  addresses   the  labor                                                                    
     provision  and is  in support  of an  equitable Project                                                                    
     Labor agreement.                                                                                                           
                                                                                                                                
     My responsibilities  for the last 14  years include the                                                                    
     construction  of  Affordable   Housing  and  associated                                                                    
     infrastructure in the Bristol Bay  region.  As such, it                                                                    
     is my responsibility to ensure  that Federal, State and                                                                    
     local  funds  allocated  to   low  to  moderate  income                                                                    
     housing  are shepherded  towards providing  the maximum                                                                    
     quantity of  safe, decent,  and affordable  housing for                                                                  
     every dollar spent while maximizing local labor.                                                                           
                                                                                                                                
     At  the  time  I  started this  job,  skilled  building                                                                    
     trades almost did not exist  in the 32 communities BBHA                                                                    
     serves.   This paucity of local  building skills forced                                                                    
     contractors to  import a majority  of their  labor. The                                                                    
     creation of  the Southwest Alaska  Vocational Education                                                                    
     Center,  or   SAVEC,  through   the  leadership   of  a                                                                    
     dedicated  core of  local  leaders  with the  financial                                                                    
     support of Federal, State and  local agencies, and with                                                                    
     a  major   part  being  played  by   the  Alaska  Works                                                                    
     Partnership,   Inc.   has  slowly,   but   effectively,                                                                    
     reversed  that situation.    Mr.  McClure has  provided                                                                    
     numbers of  SAVEC training graduates that  have allowed                                                                    
     affordable home construction labor  in the region to be                                                                    
     95% locally sourced.                                                                                                       
                                                                                                                                
     Institutions  such  as  SAVEC, with  the  training  and                                                                    
     financial input of  Alaskan unions,  will  be needed to                                                                    
     ensure   that  Alaskan   residents   are  prepared   to                                                                    
     construct  and operate the gas pipeline.                                                                                   
                                                                                                                                
     I emphasize  that it was the  cooperation, training and                                                                    
     financial support of the  union trade organizations and                                                                    
     advocates and  their steadfast  support to  provide the                                                                    
     training  and  entry  level opportunities  for  village                                                                    
     residents  that  has  made  this,  by  any  measure,  a                                                                    
     successful effort.                                                                                                         
                                                                                                                                
     The pipeline and other future  major public and private                                                                    
     constructions  will  be  a successful  with  the  labor                                                                    
     leadership, organization  and demonstrated capabilities                                                                    
     of the  local unions and their  organizations, ensuring                                                                    
     maximum participation of Alaskan residents.                                                                                
                                                                                                                                
2:35:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  announced that the  committee would be  in recess                                                               
until 3:00 p.m.                                                                                                                 
                                                                                                                                
3:03:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO reconvened  the meeting  at 3:03  p.m. and  noted                                                               
that public testimony  will remain open.  He  then announced that                                                               
the remainder  of the meeting  will be a roundtable  during which                                                               
the  committee will  hear concerns  from the  producers regarding                                                               
concerns they have regarding previous testimony.                                                                                
                                                                                                                                
3:06:14 PM                                                                                                                    
                                                                                                                                
DAVID VAN  TUYL, Manager,  Gas Commercialization,  BP Exploration                                                               
(Alaska)  Inc.  (BP),  paraphrased  from  the  following  written                                                               
testimony [original punctuation provided]:                                                                                      
                                                                                                                                
     Chairman  Gatto  and  Members of  the  House  Resources                                                                    
     Committee,  we appreciate  the  opportunity to  address                                                                    
     you regarding points that have  been made over the last                                                                    
     few days.  We recognize  you have a very busy schedule,                                                                    
     and we will make our comments brief.                                                                                       
                                                                                                                                
     My name  is Dave  Van Tuyl, representing  BP.   With me                                                                    
     here is  Wendy King, representing ConocoPhillips  and I                                                                    
     believe Bill  McMahon with ExxonMobil is  joining us by                                                                    
     telephone.  While  I represent BP, these  points I will                                                                    
     be providing  in testimony  have been  jointly prepared                                                                    
     with ConocoPhillips and ExxonMobil.                                                                                        
                                                                                                                                
     The  first and  most important  point I  want to  leave                                                                    
     with  you is  that we  fundamentally disagree  with the                                                                    
     characterization  of the  Alaska Gas  project economics                                                                    
     as recently presented by Antony Scott.                                                                                     
                                                                                                                                
     We have  concerns over  many different  statements made                                                                    
     by Mr.  Scott, but in  the interest of time  I'll limit                                                                    
     my comments to addressing three key concerns.                                                                              
                                                                                                                                
     1.  Underlying economic  methodology  - Decoupling  the                                                                    
     Upstream from the Midstream                                                                                                
     2. Nature of firm shipping commitments                                                                                     
     3. The importance of long  term cash flow in investment                                                                    
     decision making                                                                                                            
                                                                                                                                
     We appreciate this opportunity to state our concerns.                                                                      
                                                                                                                                
     I  suggest that  I go  thru my  talking points  here in                                                                    
     about 10  or 15  minutes and then  we are  available to                                                                    
     spend all the  time the committee wants  to answer your                                                                    
     questions.                                                                                                                 
                                                                                                                                
     And I'm confident that, especially  with Ms. King here,                                                                    
     you won't be shy about asking questions.                                                                                   
                                                                                                                                
3:07:37 PM                                                                                                                    
                                                                                                                                
     Point Number 1 - Project Economics                                                                                       
                                                                                                                                
     We  are  very  concerned  that  the  economic  analysis                                                                    
     presented  by  Mr.  Scott to  this  committee  is  very                                                                    
     misleading.                                                                                                                
                                                                                                                                
     Economics                                                                                                                
     ·        Without the commitment of capital to the pipeline or                                                              
     the  huge   financial  obligation  required   for  Firm                                                                    
     Transportation  (FT)  for   the  midstream  facilities,                                                                    
     there is no way to realize  value from the sale of gas.                                                                    
     Thus,  any  analysis  of   the  project  that  excludes                                                                    
     midstream capital and FT is incomplete.                                                                                    
     ·        In reality, major gas pipeline projects are built on                                                              
     the    back   of    long-term,   firm    transportation                                                                    
     commitments.   For  example,  two  recent gas  pipeline                                                                    
     projects are  Alliance and  Rockies Express.   Alliance                                                                    
     required  15  year  shipping commitments,  and  Rockies                                                                    
     Express  required 10  year commitments.    And both  of                                                                    
     those projects are significantly  smaller in scale than                                                                    
     the Alaska gas pipeline project.                                                                                           
     ·        And because these commitments are just that, legally                                                              
     binding  commitments, they  need  to  be accounted  for                                                                    
     when evaluating  project economics.   These commitments                                                                    
     were ignored in Mr. Scott's analysis of the economics.                                                                     
                                                                                                                                
     ·        That analysis suggests that the upstream project can                                                              
     be developed without a commitment to the midstream.                                                                        
     ·        Because that method ignores the FT obligation, the                                                                
     resulting assertion that our  upstream economics are so                                                                    
     robust is  patently incorrect.   In fact,  the upstream                                                                    
     pays  for the  midstream.   It does  this through  firm                                                                    
     transportation commitments.   These  commitments cannot                                                                    
     be ignored.                                                                                                                
     ·        In order to evaluate the economics of any project,                                                                
     you  must   account  for   the  commitments   that  are                                                                    
     necessary to enable the project to move forward.                                                                           
     ·        We must evaluate economics on the complete project,                                                               
     that  is on  an  integrated basis  (top  to bottom)  to                                                                    
     properly account  for total project risk  and determine                                                                    
     whether  the  project  is  economic.  Any  decision  to                                                                    
     invest will be based on integrated project economics.                                                                      
     ·        To analyze a project correctly, one needs to look at                                                              
     both the costs  and the benefits together,  that is, we                                                                    
     need  to evaluate  the benefits  of the  reserves along                                                                    
     with the  cost of  the commitments required  to produce                                                                    
     those  reserves.   In fact,  that's the  way we  do our                                                                    
     project analysis.                                                                                                          
                                                                                                                                
3:10:22 PM                                                                                                                    
                                                                                                                                
     ·        To conclude our discussion on the economics I wanted                                                              
     to just touch on reserve booking.                                                                                          
     ·        We agree with the Administration that being able to                                                               
     add reserves  to our  books is a  benefit -  that's the                                                                    
     lifeblood of our business.   But we don't book reserves                                                                    
     at   any  cost.     They   need   to  be   economically                                                                    
     recoverable.                                                                                                               
     ·        And we don't book the "value" of our reserves.  Any                                                               
     value attributed  to those reserves will  be determined                                                                    
     by  the  cost of  the  commitments  and the  investment                                                                    
     required to  get those reserves  to market.   Hopefully                                                                    
     we can  get the gas  to market cheaper than  the market                                                                    
     price.                                                                                                                     
     ·        Remember that for gas, the transportation cost is a                                                               
     very  significant  portion  of  the value  of  the  gas                                                                    
     itself  -   that  makes  gas  projects   with  a  large                                                                    
     transportation component inherently risky.                                                                                 
     ·        When we add reserves to our books, which we hope to                                                               
     be able  to do for  Alaska's gas resource,  Wall Street                                                                    
     will  notice.   They will  also notice  when we  inform                                                                    
     them  of the  firm transportation  commitments required                                                                    
     to underpin  the project, and  the cost of  the project                                                                    
     to develop those reserves.                                                                                                 
                                                                                                                                
     ·       So to summarize    our    concern   with    the                                                                    
     characterization  of the  economics,  we disagree  with                                                                    
                                       rd                                                                                       
     Mr. Scott's analysis that with a 3   party pipeline the                                                                    
     upstream business  can be analyzed separately  from the                                                                    
     midstream  investment.     That  analysis  ignores  the                                                                    
     commitments  required to  develop  the  upstream.   And                                                                    
     therefore  we believe  that  analysis is  fundamentally                                                                    
     flawed.                                                                                                                    
                                                                                                                                
3:12:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ANNA  FAIRCLOUGH,   Alaska  State   Legislature,                                                               
inquired as to  why the Rockies project, which is  over 800 miles                                                               
in length, isn't comparable in some way.                                                                                        
                                                                                                                                
MR. VAN  TUYL specified  that the two  projects he  mentioned are                                                               
about  an order  of  magnitude smaller  in terms  of  cost.   The                                                               
Rockies  Express  project  cost   about  $4  billion,  while  the                                                               
projected costs  of the Alaska  project in 2001 was  $20 billion.                                                               
With increased costs since 2001,  there has been speculation that                                                               
the cost of  the Alaska project could be as  high as $30 billion.                                                               
Similarly,  the   Alliance  project  is  about   a  $3.7  billion                                                               
investment and  moves 1.6 billion  cubic feet a day,  whereas the                                                               
Alaska project is expected to move 4.5 billion cubic feet a day.                                                                
                                                                                                                                
3:13:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH  inquired as  to why  the costs  to run                                                               
800 miles  in the Rockies  Express project are so  different from                                                               
that   of   the   Alaska  project.      She   acknowledged   that                                                               
transportation would be  a factor as would the  cost of materials                                                               
at the time  of construction, but maintained that it  seems to be                                                               
quite  a  difference  for  what seems  to  be  fairly  comparable                                                               
mileage.                                                                                                                        
                                                                                                                                
3:14:01 PM                                                                                                                    
                                                                                                                                
MR.  TUYL pointed  out that  the  project evaluated  in 2001  was                                                               
3,600 miles.   He said that  it's known that 2,100  miles of pipe                                                               
has  to  be  built  to   transport  gas  into  Alberta  since  no                                                               
transportation  system   exists  today  to  get   gas  that  far.                                                               
Although it's  not known whether new  pipe will have to  be built                                                               
from  Alberta south,  that was  assumed to  be the  case for  the                                                               
purposes of  comparison.  The  aforementioned results  in another                                                               
1,500 miles  to transport gas  from Alberta to the  upper MidWest                                                               
market, which totals 3,600 miles.                                                                                               
                                                                                                                                
3:15:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO related  his understanding  that the  $30 billion                                                               
estimate is a Chicago estimate rather than an Alberta estimate.                                                                 
                                                                                                                                
MR.  TUYL confirmed  that the  $30 billion  estimate assumes  new                                                               
pipe is built to Chicago.   However, even if new pipe isn't built                                                               
out  of  Alberta,  there  will need  to  be  firm  transportation                                                               
commitments to move gas out of Alberta, even on existing pipe.                                                                  
                                                                                                                                
3:15:34 PM                                                                                                                    
                                                                                                                                
MR. TUYL continued:                                                                                                             
                                                                                                                                
     Point Number Two                                                                                                       
                                                                                                                                
     The second point  we want to emphasize is  to ensure we                                                                    
     have  a common  understanding  of the  nature of  these                                                                    
     firm  transportation  commitments   we've  just  talked                                                                    
     about.                                                                                                                     
                                                                                                                                
     Nature of Firm Transportation Commitments                                                                                
     FT  is a  binding commitment  made  by a  shipper to  a                                                                    
     pipeline company  in an open season  to secure capacity                                                                    
     on  the   pipeline  for  a  specified   duration  at  a                                                                    
     specified cost                                                                                                             
     There are  a few important  facts to be clear  on about                                                                    
     FT                                                                                                                         
     FT  is binding  legal obligation.   It  becomes binding                                                                    
     once the  necessary conditions  are met,  including the                                                                    
     pipeline coming into operation.                                                                                            
     Mr. Scott  has claimed that  the Producers say  that FT                                                                    
     is "exactly  like debt".   I'm not  aware of any  of us                                                                    
     having said  that in testimony.   Long  term commercial                                                                    
     commitments like  FT are often characterized  as "debt-                                                                    
     like", and must be reported to the SEC.                                                                                    
                                                                                                                                
     The core  issue is  whether the FT  commitments require                                                                    
     the  producers to  absorb the  substantial majority  of                                                                    
     the risk associated with the project.                                                                                      
     FT is  a financial obligation,  and it is  certain that                                                                    
     the  lenders  would  have  recourse  to  the  financial                                                                    
     security  provided by  the  producers'  FT, should  the                                                                    
     pipeline company fail to meet its obligations.                                                                             
     Therefore, FT cannot be ignored if a project is to be                                                                      
     evaluated properly.                                                                                                        
                                                                                                                                
3:17:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO   interrupted  Mr.  Van  Tuyl   and  related  his                                                               
understanding that Mr.  Van Tuyl is saying that the  SEC wants to                                                               
know what the debt would be.                                                                                                    
                                                                                                                                
MR.  VAN TUYL  clarified  that the  SEC  requires [producers]  to                                                               
report long-term commercial commitments.   In further response to                                                               
Co-Chair Gatto,  Mr. Van Tuyl  specified that BP's  annual report                                                               
includes  a  host of  information,  including  assets, debt,  and                                                               
debt-like  obligations.   Therefore, the  annual report  includes                                                               
long-term commercial commitments.                                                                                               
                                                                                                                                
3:17:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO asked  if gas in the ground can  be reported as an                                                               
asset.                                                                                                                          
                                                                                                                                
MR. VAN TUYL clarified that gas  in the ground can be reported as                                                               
an  asset once  it  reaches a  status called  proven.   The  vast                                                               
majority of  gas in Alaska isn't  proven, he related.   The other                                                               
portion of  the gas that's  proven is  that used for  field fuel,                                                               
which is a  small fraction of the known resource.   The gas would                                                               
become proven once there's a  demonstrated method to move the gas                                                               
to market.                                                                                                                      
                                                                                                                                
3:18:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  surmised then that  all of the known  Prudhoe Bay                                                               
reserves that have  been used to push the oil  out are considered                                                               
unproven.                                                                                                                       
                                                                                                                                
MR. VAN TUYL referred to them as a nonproven resource.                                                                          
                                                                                                                                
3:18:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FAIRCLOUGH   asked  if  the  term   proven  is  a                                                               
financial term or a term used within the oil and gas industry.                                                                  
                                                                                                                                
MR. VAN  TUYL confirmed  that the  term proven is  a term  of art                                                               
that  is used  by  the  SEC to  establish  a  certain quality  of                                                               
resource that has  reached a certainty of being  developable.  To                                                               
reach  proven status,  certain hurdles  have to  be crossed.   In                                                               
further  response  to  Representative Fairclough,  Mr.  Van  Tuyl                                                               
confirmed that the term proven is a recognized accounting term.                                                                 
                                                                                                                                
3:19:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON surmised  then that  nonproven means  that                                                               
the resource is  known to be present, but it  hasn't went through                                                               
the steps to make it proven.                                                                                                    
                                                                                                                                
3:19:46 PM                                                                                                                    
                                                                                                                                
WENDY KING, Director of External  Strategies, ANS Gas Development                                                               
Team,  ConocoPhillips  Alaska,  Inc., interjected  that  she  has                                                               
heard  the  term  "probable reserves"  and  "possible  reserves",                                                               
although  those   definitions  don't   seem  to  be   as  clearly                                                               
established.     The   proven   category,   although  there   are                                                               
distinctions within it, is a defined term, she said.                                                                            
                                                                                                                                
3:20:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked if  there are  times when  it is                                                               
advantageous not to finish the  process that would move a reserve                                                               
from unprovable to provable.                                                                                                    
                                                                                                                                
MR. VAN TUYL  answered that the primary motivation  is to develop                                                               
resources.   Therefore,  the commercial  motivation is  to obtain                                                               
resources  and  develop  through   the  value  chain  from  known                                                               
possible  to   probable  and  to   ultimate  development.     The                                                               
motivation is to continue to advance.                                                                                           
                                                                                                                                
3:20:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG said:                                                                                                 
                                                                                                                                
     One of the  things that brings up a question  for me is                                                                    
     the  amount  of gas  that's  provable  up there  versus                                                                    
     that's  not   provable  that   might  be   probable  or                                                                    
     otherwise or speculative if it's  there.  We understand                                                                    
     ...  there needs  to be  a lot  more gas  than what  is                                                                    
     currently  proven or  being able  to pull  off Prudhoe.                                                                    
     So, you  might know there's  more gas up there  and not                                                                    
     want it proven, but as  soon as it becomes economically                                                                    
     viable you  just finish that  process and it  becomes a                                                                    
      proven reserve.  And there you're going forward with                                                                      
     it.                                                                                                                        
                                                                                                                                
3:21:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES related his  understanding that when the gas                                                               
is in  the ground, one would  have a good idea  that it's present                                                               
after it has  been discovered.  In fact, the  gas may be injected                                                               
into the oil to  obtain more oil.  However, until  there is a way                                                               
to  deliver  that  gas  to  market,  it  doesn't  become  proven.                                                               
Therefore,  he  surmised  that the  term  "marketable"  would  be                                                               
synonymous with "proven."                                                                                                       
                                                                                                                                
MR. VAN TUYL  responded that Representative Roses  has provided a                                                               
fairly apt  description.  He  pointed out that there's  an aspect                                                               
of commercial viability  of the resource that  is considered when                                                               
advancing the resource from possible to probable to proven.                                                                     
                                                                                                                                
3:22:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   ROSES   opined   that  once   a   transportation                                                               
commitment  is  made, regardless  of  the  price,  it is  a  risk                                                               
because  whether it's  delivered or  not there  will be  payment.                                                               
The risk is that the entity  can't deliver the volume to which it                                                               
committed.   Therefore, he  surmised that it  becomes a  debt the                                                               
first  day that  the entity  can't deliver  what it  committed to                                                               
deliver.                                                                                                                        
                                                                                                                                
MR.  VAN  TUYL stated  his  agreement  that Representative  Roses                                                               
comments are  a reasonable summary.   He then noted that  the one                                                               
thing that  is certain about a  FT commitment is that  the entity                                                               
making  that  commitment  will   ultimately  make  good  on  that                                                               
obligation to  the pipeline  company to  which the  commitment is                                                               
made, which is  why it's a legally binding  obligation that can't                                                               
be  ignored.    "Hopefully,  in   association  with  making  that                                                               
commitment  for that  period, you're  also able  to deliver  gas.                                                               
But  that's  not  a  known;   what's  known  is  that  that  firm                                                               
transportation commitment  is a  legally binding  obligation," he                                                               
specified.                                                                                                                      
                                                                                                                                
3:25:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  recalled when  Mr. Van  Tuyl said  that the                                                               
economics  have been  misrepresented.   He further  recalled that                                                               
Mr. Van Tuyl  said that as a part of  that [committed] volume and                                                               
the commitment to  inject gas into a pipeline to  be delivered, a                                                               
company can't  ignore the value  of that without  calculating the                                                               
costs because without the costs  the "borrow ability" is unknown.                                                               
He related his  understanding that Mr. Van Tuyl  was referring to                                                               
knowing the  costs, beginning to  end, in order for  investors to                                                               
commit to a specified amount of gas.                                                                                            
                                                                                                                                
MR. VAN TUYL  noted his agreement with Representative  Roses.  He                                                               
added that the  gas only flows down the pipeline  if there was an                                                               
upfront commitment  made to the  builder of the pipeline  for the                                                               
transportation capacity  for a period  of time.   The commitment,                                                               
which is  a real  obligation, had  to be made  first in  order to                                                               
allow the gas  to flow.  Therefore, the two  have to be evaluated                                                               
in concert, he highlighted.                                                                                                     
                                                                                                                                
3:26:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON inquired  as  to  whether [the  producers]                                                               
have ever experienced not having the amount of gas committed.                                                                   
                                                                                                                                
MR. VAN TUYL  said there are always risks  on the deliverability,                                                               
the ability to actually move gas  to the pipeline on a day-to-day                                                               
basis.  Mr.  Van Tuyl confirmed that it has  happened for BP, and                                                               
said he could obtain statistics for the committee.                                                                              
                                                                                                                                
MS.  KING noted  that she  has worked  for Conoco  in the  United                                                               
Kingdom on  the Southern Gas  Basin producing known assets.   One                                                               
winter it was  particularly cold in the United  Kingdom and there                                                               
was an  unexpected event that caused  the company not to  be able                                                               
to deliver  gas for  an extended  period of  time, even  in known                                                               
producing fields.   However,  she said that  she didn't  have any                                                               
collective statistics.                                                                                                          
                                                                                                                                
3:28:31 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO related  his understanding that each  of the terms                                                               
probable,  possible, and  proven all  have an  associated number.                                                               
He said,  "P90 for  proven.   You're sitting  on the  gas, you've                                                               
pumped it  for 20 years, you  know it's there, you're  allowed to                                                               
say it's  90 percent proven."   He then posed an  assumption that                                                               
Prudhoe Bay  is 90  percent proven, which  he said  doesn't sound                                                               
like a risk.                                                                                                                    
                                                                                                                                
MR. VAN  TUYL clarified  that proven  is a term  of art  with SEC                                                               
reserve booking  methodology.  The  resource that is  known about                                                               
at Prudhoe  Bay is not a  proven resource, although it's  a known                                                               
resource.  Proven requires certain steps of commerciality.                                                                      
                                                                                                                                
3:30:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO asked  then if the gas moves from  known to proven                                                               
when the gas is available to be placed in the pipe.                                                                             
                                                                                                                                
MR. VAN  TUYL explained that  typically as a project  matures, it                                                               
would move through  the reserve categorization.  At  the point of                                                               
committing  funds  to  develop  the   project,  the  SEC  or  the                                                               
company's  auditors  would  view  that as  a  commitment  to  the                                                               
project and sufficient commercial  viability since the company is                                                               
willing  to place  more investment  into  the project.   At  that                                                               
point, the reserve is placed  into the proven category, which has                                                               
subcategories.   Until this  point, the  resource isn't  a proven                                                               
resource.                                                                                                                       
                                                                                                                                
3:31:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO posed a situation  in which the producer isn't the                                                               
pipeline builder.   As the pipeline is being  built, the producer                                                               
is waiting for the opportunity to  bid for the reserves.  At that                                                               
point, would  the producer review  all the gas it  has determined                                                               
to be  proven and  decide that  the FT would  be made,  he asked.                                                               
"Is there some thing that happens  at the moment you make your FT                                                               
in a  pipeline you do not  own, you've taken on  a responsibility                                                               
to pay for  the shipment of whatever FT you  have but you've also                                                               
gained the asset, the bookable reserve," he said.                                                                               
                                                                                                                                
MR. VAN  TUYL pointed  out that  each company  will have  its own                                                               
thresholds and standards  of reserve booking.  He  said he didn't                                                               
know if he could tell  the committee definitively when a bookable                                                               
reserve would occur in the aforementioned scenario.                                                                             
                                                                                                                                
3:32:45 PM                                                                                                                    
                                                                                                                                
MS. KING  requested that questions regarding  how companies might                                                               
view  things with  respect  to making  decisions  during an  open                                                               
season be addressed on an individual basis.                                                                                     
                                                                                                                                
MR. VAN  TUYL pointed out  that an  open season is  a competitive                                                               
process and the  [producers] are competitors who need  to be able                                                               
to act independently and compete.                                                                                               
                                                                                                                                
3:33:27 PM                                                                                                                    
                                                                                                                                
BILL MCMAHAN,  Commercial Manager, Alaska Gas  Development Group,                                                               
ExxonMobil Corporation, regarding the  progression of the booking                                                               
of  reserves, said  that as  a  project gets  closer to  startup,                                                               
individual companies  may become  more confident.   He  said that                                                               
one strategy  could be to book  a portion of the  proven reserves                                                               
as key  milestones are made.   For instance, a portion  of proven                                                               
reserves  could  be  [booked] when  the  pipeline  company  makes                                                               
commitments in the open season,  obtains its permits, or when the                                                               
pipeline company  sanctions or  funds the  project.   Mr. McMahan                                                               
said that he hasn't viewed the  booking of the proven reserves in                                                               
this  project as  a singular  event as  it could  be a  series of                                                               
events.                                                                                                                         
                                                                                                                                
3:34:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  likened the  situation to a  funnel in  which the                                                               
wide part of  the funnel says there's no  certificate and there's                                                               
100 percent  uncertainty while the  narrow portion of  the funnel                                                               
says that the  certainty is 5 percent.  Therefore,  at some point                                                               
between the 100  percent and 5 percent lies  a significant amount                                                               
of certainty and the company is willing to book certain amounts.                                                                
                                                                                                                                
MR.  MCMAHAN   noted  his   agreement  with   the  aforementioned                                                               
characterization.   As  uncertainty  narrows,  the confidence  to                                                               
represent the gas resource to  the investment community as proven                                                               
increases.                                                                                                                      
                                                                                                                                
3:35:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FAIRCLOUGH   returned  to  the  matter   of  cost                                                               
fluctuations  and FT  commitments.   With  regard  to Ms.  King's                                                               
example   in  the   United  Kingdom,   Representative  Fairclough                                                               
inquired  as to  whether  the  company has  a  clause within  the                                                               
contract  addressing  acts of  God  or  war  that resulted  in  a                                                               
company's inability to move gas  that didn't require the producer                                                               
to pay the shippers in these instances.                                                                                         
                                                                                                                                
MS. KING said  that the agreement in that  particular instance is                                                               
confidential.   However, she offered  that force  majeure clauses                                                               
are typical clauses  in some arrangements.  She  explained that a                                                               
pipeline entity  is subject to  a component of the  charge called                                                               
the demand  charge, which must  be paid whether gas  is delivered                                                               
or  not.   Ms.  King  related her  anticipation  that a  pipeline                                                               
entity negotiating firm shipping  commitment would discuss how to                                                               
handle a force majeure event.                                                                                                   
                                                                                                                                
3:36:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH  asked whether a pipeline  entity would                                                               
negotiate some  flexibility in  any contract  in order  to reduce                                                               
the  risk from  the demand  clause in  case something  unforeseen                                                               
happened.                                                                                                                       
                                                                                                                                
MR. VAN TUYL  explained that typically on a  gas pipeline project                                                               
a completion  guarantee governs  until the  pipeline is  put into                                                               
service.   Therefore, the  entity that  is building  the pipeline                                                               
has  a  guarantee  to  its  lenders  that  the  project  will  be                                                               
completed.   Until that point,  the holders of the  FT commitment                                                               
aren't binding.   Typically, once a project is  placed in service                                                               
the FT  commitment is binding.   For example, if the  pipeline is                                                               
in operation  but something happens  on the upstream end  and the                                                               
pipeline  entity is  unable to  deliver gas  to the  project, the                                                               
pipeline  entity isn't  excused from  that obligation  to deliver                                                               
the gas.   However, if there's  some reason that the  pipeline is                                                               
unable to receive gas, that  would typically relieve the pipeline                                                               
entity  of delivering  gas until  the pipeline  is again  able to                                                               
receive gas.   As  mentioned earlier,  the aforementioned  is the                                                               
subject of  a negotiation  between the  pipeline company  and the                                                               
shipper.                                                                                                                        
                                                                                                                                
3:38:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES inquired as to  at what point in the process                                                               
from  reserves,  to  probables,  to  known  reserves,  to  an  FT                                                               
commitment  does  that commodity  become  the  most valuable  for                                                               
getting investors to participate in a project.                                                                                  
                                                                                                                                
MR. VAN  TUYL opined  that the commodity  would be  most valuable                                                               
once it's  able to  be placed  in a  market, provided  the market                                                               
wants to  accept that commodity.   Therefore, the  investment has                                                               
been delivered, provided  that it has been delivered  in a manner                                                               
that  the commodity  can be  delivered to  the market  at a  cost                                                               
below the price of the commodity.                                                                                               
                                                                                                                                
MS. KING reminded the committee  of the testimony she provided on                                                               
Monday  when she  tried to  illustrate the  gated decision-making                                                               
process.    Clearly,  a  critical milestone  would  be  the  open                                                               
season.    She  noted  that more  engineering  and  environmental                                                               
permitting  work   will  continue  in  parallel   with  the  FERC                                                               
certification  process.    Furthermore,   during  that  time  the                                                               
pipeline entity  will continue to receive  updated cost estimates                                                               
and more market information.  Ms.  King said that the question is                                                               
a bit unanswerable because there  isn't knowledge as to what will                                                               
happen in  the market.  The  aforementioned is what she  said she                                                               
was trying to illustrate with  her testimony on Monday.  "There's                                                               
going to be  uncertainties and we're going to do  all that we can                                                               
in  developing  a project  to  try  to  mitigate those  risk  and                                                               
uncertainties  in advance,  but you  don't know  what's going  to                                                               
happen,  for example,  to  the  price of  steel  or  the cost  of                                                               
labor," she said.                                                                                                               
                                                                                                                                
3:41:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  related his understanding that  this conversation                                                               
is leading  to the  determination of what  the net  present value                                                               
is.    He recalled  that  Mr.  Scott  presented a  different  net                                                               
present value than that [of the producers].                                                                                     
                                                                                                                                
MR. VAN TUYL said that his testimony will briefly touch on that.                                                                
                                                                                                                                
3:42:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  related that his anticipation  was that Mr.                                                               
Van  Tuyl  would  [specify  that  the  point  in  the  process  a                                                               
commodity  becomes the  most valuable  for  getting investors  to                                                               
participate in  a project] is  when the firm commitment  is made.                                                               
However,  he recalled  that Mr.  Van  Tuyl said  that's also  the                                                               
point at which it's classified as the greatest risk.                                                                            
                                                                                                                                
MR. VAN  TUYL confirmed that  the point  at which there's  a firm                                                               
transportation  is  a  great risk  because  the  pipeline  entity                                                               
doesn't  know  whether it  can  enter  the  market and  obtain  a                                                               
sufficient price  for the  commodity to cover  the costs  for the                                                               
duration of the firm transportation commitment.                                                                                 
                                                                                                                                
REPRESENTATIVE ROSES  surmised then  that if  it is  the greatest                                                               
asset  and potentially  the greatest  risk,  the pipeline  entity                                                               
would  try  to maximize  the  amount  put  into  it in  order  to                                                               
capitalize  on  the greatest  potential  asset.   Therefore,  the                                                               
pipeline entity will want to ensure the  price is as low as it is                                                               
in all aspects in order to minimize the potential risk.                                                                         
                                                                                                                                
MR. VAN TUYL agreed with  Representative Roses, adding that there                                                               
are certain  things that the  pipeline entity can try  to control                                                               
or  at least  influence to  reduce those  risks it  can.   If the                                                               
pipeline entity controls the risks  that it can, it increases the                                                               
likelihood that the pipeline entity will have a good outcome.                                                                   
                                                                                                                                
3:43:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  asked if  [BP] would  care about  the risk  if it                                                               
were the pipeline owner.                                                                                                        
                                                                                                                                
MR. VAN TUYL  opined that the pipeline owner will  want to ensure                                                               
that  it has  customers  for a  long  time in  order  to have  an                                                               
expandable  project with  more customers.   Therefore,  he opined                                                               
that  the  pipeline owner  would  want  to  have a  project  that                                                               
attracts customers.   He pointed out that part of  the dynamic is                                                               
that if an entity is just  a pipeline company, the only source of                                                               
revenue is from  the rate base.  Therefore,  the pipeline company                                                               
is  motivated to  increase the  rate  base and  the tariff  while                                                               
ensuring the  customers remain.  The  aforementioned is different                                                               
from an entity that wants to  maximize the value of the resource,                                                               
which would desire the lowest cost project.                                                                                     
                                                                                                                                
3:44:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  surmised  then   that  since  this  pipeline  is                                                               
certainly a monopoly pipeline, the  builder wouldn't have much of                                                               
an  interest, except  to ensure  that it  cost quite  a bit.   He                                                               
asked  if that  would be  expected from  an entity  that is  only                                                               
building the pipeline.                                                                                                          
                                                                                                                                
MR.  VAN  TUYL answered  that  as  a  resource owner  [BP]  would                                                               
certainly have  the motivation to  deliver a low cost  project to                                                               
prevent the  aforementioned situation.  A  [resource owner] would                                                               
want a  low capital and  low operating  cost project in  order to                                                               
ensure the value of the resource is maximized over time.                                                                        
                                                                                                                                
3:45:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON highlighted  that this  exact problem  has                                                               
occurred with  a producer-owned  pipeline in  TAPS, at  least for                                                               
the interstate portion.                                                                                                         
                                                                                                                                
MR. VAN TUYL  responded, "We do want the  lowest possible capital                                                               
cost  project."   He then  noted  that FERC  will adjudicate  the                                                               
rates  associated  with the  project  and  review the  return  on                                                               
equity and the cost of debt.                                                                                                    
                                                                                                                                
3:47:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  said he agreed  that [the  producers] want                                                               
the lowest cost project, but whether  it's the lowest tariff is a                                                               
different discussion.   With regard to the portion  of risk being                                                               
borne by  the pipeline  company for  delays, the  risk is  on the                                                               
pipeline owner and  those doing the debt service  on the pipeline                                                               
because  FT doesn't  go  into  effect until  the  pipeline is  in                                                               
service.                                                                                                                        
                                                                                                                                
3:48:28 PM                                                                                                                    
                                                                                                                                
MR. VAN  TUYL returned  to his  prepared testimony  and concluded                                                               
the  portion   addressing  the  nature  of   firm  transportation                                                               
commitments:                                                                                                                    
                                                                                                                                
     And  generic statements  about treatment  of long  term                                                                    
     commercial  commitments is  dangerous.   Commitments of                                                                    
     the  magnitude required  to underpin  this project  are                                                                    
     massive  in  both  the dollar  amount  and  the  likely                                                                    
     duration.                                                                                                                  
     These commitments will create  their own weather in the                                                                    
     financial markets - they must be considered.                                                                               
                                                                                                                                
3:49:21 PM                                                                                                                    
                                                                                                                                
     Point Number Three                                                                                                     
     The third and  final point we wanted  to emphasize this                                                                    
     afternoon is  that confidence in  future cash  flows is                                                                    
     very important  in evaluating the  commercial viability                                                                    
     of any investment decision.   That is particularly true                                                                    
     for a  commitment as large  as the Alaska  gas pipeline                                                                    
     project.                                                                                                                   
                                                                                                                                
     Mr.  Scott suggested  that cash  flows beyond  10 years                                                                    
     are effectively  inconsequential in  financial decision                                                                    
     making on this project That's not true.                                                                                    
                                                                                                                                
3:49:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO interjected that he  didn't believe that Mr. Scott                                                               
ever used  the word "inconsequential"  but rather made  the point                                                               
that it was significantly abbreviated.                                                                                          
                                                                                                                                
3:50:11 PM                                                                                                                    
                                                                                                                                
MR. VAN  TUYL said he  would accept Co-Chair  Gatto's correction,                                                               
but opined  that the  point stands that  the implication  was the                                                               
focus is  on the  cash flows  for the first  10 years  and beyond                                                               
that they  become less important.   The [producers],  he related,                                                               
don't believe  that to be  true.  Mr.  Van Tuyl then  returned to                                                               
his prepared testimony:                                                                                                         
                                                                                                                                
     Cash  flows  further out  in  time  tend to  have  less                                                                    
     effect on NPV - this is true                                                                                               
     But cash  impact years into  the future will  indeed be                                                                    
     real                                                                                                                       
     Many  factors  are  used  to  evaluate  a  go  -  no-go                                                                    
     decision  for   a  project,   not  just   one  economic                                                                    
     yardstick like NPV                                                                                                         
     In  evaluating the  economics of  projects, we  look at                                                                    
     many  different measures.   NPV,  IRR and  PI are  just                                                                    
     some of the measures which are considered.                                                                                 
     The  ability of  a project  to generate  long-term cash                                                                    
     flow is also an important consideration to investors.                                                                      
     It's important  to bear in  mind that we expect  the FT                                                                    
     commitments  we just  talked about  will  be in  effect                                                                    
     well beyond 10 years.                                                                                                      
     So  those making  long terms  commitments want  to know                                                                    
     that they'll  be able  to make good  on them.   Lenders                                                                    
     will want to know this, too.                                                                                               
                                                                                                                                
3:51:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG inquired as to  what Mr. Van Tuyl views                                                               
as the duration of  the FTs in the first open  season in a normal                                                               
project versus that of Alaska's project.                                                                                        
                                                                                                                                
MR. VAN TUYL  specified that the duration of the  FT can vary and                                                               
depends  upon the  project.   The  Alliance  pipeline going  from                                                               
Alberta into the Chicago area was  15 years for 1.6 billion cubic                                                               
feet a day,  $3.7 billion project.  The  Rockies Express pipeline                                                               
had a  10-year FT.   Because the Alaska project  is significantly                                                               
larger  in  the  size,  cost,  and nature  of  the  project,  the                                                               
expected FT  required should be  commensurately longer.   He said                                                               
that he couldn't  say with certainty the duration of  the FT.  He                                                               
then  highlighted that  an important  trend  to know  is that  in                                                               
general the longer the term of the  FT, the lower the risk on the                                                               
pipeline.    Therefore,  the  lower   the  toll  charged  by  the                                                               
pipeline.   The  aforementioned  illustrates the  benefit to  the                                                               
shipper to be  able to enter into longer FT  because of the lower                                                               
toll, but that must be weighed  against the risk of entering into                                                               
that longer commitment.                                                                                                         
                                                                                                                                
3:52:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  mentioned that  he  has  a Lukens  Energy  Group                                                               
report by  Dr. Jay Lukens, dated  June 30, 2005, that  includes a                                                               
profile showing  that from about  0-12 years, it's a  100 percent                                                               
and from 12-15 years, it's 97 percent.   He noted that it's a 4.3                                                               
bcf  Alaska gas  reserve profile.   Therefore,  he surmised  that                                                               
[the duration of the FT] would be at least 15 years.                                                                            
                                                                                                                                
3:53:54 PM                                                                                                                    
                                                                                                                                
MR. VAN TUYL continued with his prepared remarks:                                                                               
                                                                                                                                
     Let's   consider   this    point   from   a   different                                                                    
     perspective.                                                                                                               
     When  making a  decision to  purchase a  home that  you                                                                    
     know you'll  live in  for 30  years, will  the interest                                                                    
     rate on your  mortgage still matter after 10  years?  I                                                                    
     think it will.                                                                                                             
     Will  the  property  tax assessment  no  longer  matter                                                                    
     after 10 years?  Or the property tax rate?                                                                                 
     They certainly will matter,  because cash generation is                                                                    
     an important  factor in personal budgeting,  just as it                                                                    
     is  to  a major  corporation  in  making an  investment                                                                    
     decision.                                                                                                                  
                                                                                                                                
     Getting  this project  right has  enough challenges  of                                                                    
     its  own,  let  alone  when we  have  such  fundamental                                                                    
     disagreement with how the project is characterized.                                                                        
                                                                                                                                
     Thank you  for the opportunity to  share these concerns                                                                    
     with you.                                                                                                                  
     As  I  mentioned  at  the start,  we  have  many  other                                                                    
     concerns with  Mr. Scott's testimony, but  I've limited                                                                    
     these  remarks this  afternoon  to  these three  areas.                                                                    
     That   concludes   the   testimony  prepared   by   BP,                                                                    
     ConocoPhillips  and  ExxonMobil  unless Wendy  or  Bill                                                                    
     have anything to  add.  The three of us  would be happy                                                                    
     to answer any questions                                                                                                    
                                                                                                                                
3:55:19 PM                                                                                                                    
                                                                                                                                
MR. MCMAHAN  said that he wanted  to reinforce what Mr.  Van Tuyl                                                               
has shared  in regard to  Mr. Scott's  analysis.  With  regard to                                                               
the TAPS  tariff dispute,  Mr. McMahan  said that  the difference                                                               
between the  proposed gasline and  TAPS is that TAPS  is complete                                                               
and running  now.   Therefore, the  cost of TAPS  is known.   The                                                               
owners of TAPS  are simply trying to receive the  return on their                                                               
agreed   upon   investment.       He   acknowledged   that   it's                                                               
understandable  that shippers  on TAPS  would like  a lower  tax,                                                               
which is  what they're requesting.   The FERC has been  given the                                                               
authority  to settle  this difference  of opinion.   Mr.  McMahan                                                               
said that the  focus thus far on lowest possible  cost is because                                                               
the Alaska gasline hasn't yet been built.                                                                                       
                                                                                                                                
3:56:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO related  his understanding  that  Mr. McMahan  is                                                               
referring  to  the  TAPS  settlement  methodology.    Under  that                                                               
methodology, the RCA would determine  the tariff if the pipe were                                                               
completely  within the  state and  the product  didn't leave  the                                                               
state.                                                                                                                          
                                                                                                                                
MR. MCMAHAN said that is his understanding as well.                                                                             
                                                                                                                                
3:57:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO further  related his  understanding that  the oil                                                               
goes to  Valdez and if  it's used in the  state the tariff  is $2                                                               
whereas if the  oil is placed on  a boat, the tariff  is over $5.                                                               
The  aforementioned  is  a   huge  discrepancy,  which  certainly                                                               
impacted those  who didn't  own the pipeline  but wanted  to ship                                                               
oil.   He  related his  belief  that the  state is  one of  those                                                               
entities.   He related his understanding  that the aforementioned                                                               
hasn't been decided, but will be decided by FERC.                                                                               
                                                                                                                                
MR. MCMAHAN said that's correct.                                                                                                
                                                                                                                                
3:58:07 PM                                                                                                                    
                                                                                                                                
MS. KING  added that [the  producers] will further expand  on its                                                               
comments if allowed to do so in future committees.                                                                              
                                                                                                                                
3:59:09 PM                                                                                                                    
                                                                                                                                
MS. KING said that the  three points brought before the committee                                                               
today are the  areas of focus.   She then turned to  the issue of                                                               
reserves and  highlighted that  one of  the critical  issues will                                                               
always be the  deliverability of those reserves.  The  gas in the                                                               
ground  is different  than  the  rate at  which  the  gas can  be                                                               
produced.  Therefore,  assumptions and decisions will  have to be                                                               
made  in relation  to  the 20-  to  25-year shipping  commitments                                                               
being contemplated.  Furthermore, the lead time is substantial.                                                                 
                                                                                                                                
4:01:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  recalled that  one witness  today testified                                                               
that AGIA  is a joke as  there aren't enough reserves  and by the                                                               
time the gas is  pumped in the pipeline to get  the oil out, it's                                                               
a waste of time and money.   He asked if the producers would care                                                               
to comment.                                                                                                                     
                                                                                                                                
4:01:41 PM                                                                                                                    
                                                                                                                                
MR. VAN TUYL said that the  producers don't share that view.  The                                                               
producers  committed  $125 million  to  advance  the project  and                                                               
demonstrate  sufficient confidence  that the  producers would  be                                                               
able  to get  the gas  to  market.   He said  that the  producers                                                               
continue to  be encouraged  about the  prospects of  this project                                                               
being able to deliver this gas  to market.  He mentioned those at                                                               
BP like  to talk about a  50-year future, which is  only possible                                                               
if Alaska's  gas goes  to market.   Furthermore, BP  believes the                                                               
aforementioned  is possible  and thus  it  makes a  lot of  other                                                               
things possible, such as developing  heavy oil on the North Slope                                                               
and extending the  life of TAPS.  Therefore,  [the producers] are                                                               
absolutely  committed to  getting  Alaska's gas  to market  while                                                               
recognizing the regulatory hurdles.                                                                                             
                                                                                                                                
4:03:35 PM                                                                                                                    
                                                                                                                                
MS. KING  drew attention to  her previous testimony  and reminded                                                               
the committee that ConocoPhillips worked  very hard since 2000 to                                                               
advance  the  gasline  project.    ConocoPhillips,  she  related,                                                               
believes there  is potential  value in this  project and  want to                                                               
continue  to  pursue  that.     However,  ConocoPhillips  doesn't                                                               
believe the  project is without  risk as there are  no guarantees                                                               
in regard  to the  project economics.   Still,  ConocoPhillips is                                                               
continuing to work to advance the gasline project.                                                                              
                                                                                                                                
4:04:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON recalled  that  most of  [ConocoPhillips']                                                               
testimony has  been about upstream  in the  aspects of AGIA.   He                                                               
further recalled  testimony that the royalty  inducements and the                                                               
90-day  switching from  royalty  in-value to  royalty in-kind  is                                                               
problematic  for  [the producers].    Therefore,  there was  some                                                               
discussion of doing royalty in-value  with the guarantee that the                                                               
producers  would supply  to in-state  residential and  commercial                                                               
markets.   Representative  Seaton  asked if  that's something  in                                                               
which the producers are still interested.                                                                                       
                                                                                                                                
MR. VAN TUYL  said that [BP] is interested in  pursuing any means                                                               
that  is  mutually  agreeable  to   mitigate  those  risks.    He                                                               
emphasized that  switching from royalty  in-value to  royalty in-                                                               
kind  is incompatible  with the  long-term contracts  required as                                                               
well as the purchase and sell agreements.                                                                                       
                                                                                                                                
MS.  KING confirmed  that [ConocoPhillips]  wants to  continue to                                                               
find a  way to work the  entire area of the  resource inducements                                                               
prior to an open season.   Therefore, the producers would like to                                                               
continue a conversation with the  governor and the legislature on                                                               
this matter.                                                                                                                    
                                                                                                                                
4:06:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  commented that  the high side  of in-state                                                               
use on residential  and commercial would probably be .3  bcf.  He                                                               
then highlighted that many portions  of AGIA ensure that there is                                                               
gas  for in-state  use.    He asked  if  the  producers view  the                                                               
elimination  of  the  switching   with  the  assurance  that  the                                                               
producers  would supply  the in-state  gas at  distance-sensitive                                                               
rates as beneficial.                                                                                                            
                                                                                                                                
MR. MCMAHAN  said that this  example highlights the need  to make                                                               
AGIA  objective  driven.    If  the  [producers]  understand  the                                                               
state's  needs  through   AGIA,  then  that  will   free  up  the                                                               
applicants to propose innovative ways  to meet the state's needs.                                                               
Given  that freedom,  it would  be possible  for an  applicant to                                                               
address the concerns with switching  and its incompatibility with                                                               
FT  commitments while  addressing the  state's need  for ensuring                                                               
gas is available and deliveries are made in state.                                                                              
                                                                                                                                
4:09:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  surmised   then  that  from  ExxonMobil's                                                               
perspective, the switching is problematic.                                                                                      
                                                                                                                                
MR. MCMAHAN replied yes.                                                                                                        
                                                                                                                                
4:10:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  related  his  understanding  that  when  gas  is                                                               
shipped down  the pipe and the  state takes it as  in-kind, there                                                               
is space, a vacuum, going down the  line.  He inquired as to what                                                               
happens to that available space for new gas.                                                                                    
                                                                                                                                
MR. MCMAHAN  responded that  it depends on  when the  gap occurs.                                                               
If it's known going into the  open season that the state is going                                                               
to take  gas in-kind and deliver  it to an in-state  market, then                                                               
the  pipeline  constructor  will  be  able  to  design  the  pipe                                                               
downstream of  that point so  that there isn't an  unused portion                                                               
of  capacity.   However, if  that in-state  delivery materializes                                                               
after the  design and  construction of  the pipeline,  then there                                                               
could be  some unused capacity  downstream of that point  and for                                                               
which there would need to be  payment.  The lenders who will loan                                                               
the money  to build  this project  will need to  be paid  for the                                                               
entire line.                                                                                                                    
                                                                                                                                
4:11:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  surmised  then that  a  pipeline  builder  would                                                               
prefer that there not be any offtakes.                                                                                          
                                                                                                                                
MR.  MCMAHAN replied  no, the  pipeline builder  would prefer  to                                                               
know the  location and  the volume  of the  offtakes in  order to                                                               
design the pipeline to match that service.                                                                                      
                                                                                                                                
MR. VAN  TUYL pointed  out that the  Alaska Natural  Gas Pipeline                                                               
Act  actually envisions  an in-state  use study  to be  conducted                                                               
prior  to  the initial  open  season,  presumably to  design  the                                                               
pipeline appropriately and avoid the aforementioned situation.                                                                  
                                                                                                                                
4:12:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  said he  would guess  that the  size of  the pipe                                                               
wouldn't change following an offtake.                                                                                           
                                                                                                                                
MR. VAN  TUYL answered that it  would depend on the  magnitude of                                                               
the offtake.   Typically, an  offtake could be  accommodated with                                                               
the design  of the compression  system downstream.  He  said that                                                               
there could be a smaller  diameter pipe, if there's a significant                                                               
change in the offtake.                                                                                                          
                                                                                                                                
CO-CHAIR GATTO related his  understanding that the administration                                                               
wants to write regulations such  that the larger the offtake, the                                                               
longer lead  time companies would  have for switching.   Co-Chair                                                               
Gatto expressed concern with the amount of offtake.                                                                             
                                                                                                                                
4:13:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   recalled  that  discussions   about  the                                                               
previous package generally considered  allowing for future growth                                                               
in use will  probably amount to about .3 bcf  for all residential                                                               
and  commercial  in-state use.    However,  that doesn't  include                                                               
something like  Nikiski LNG or  Agrium or another industry.   The                                                               
chief concern,  he opined, in  AGIA is to ensure  that commercial                                                               
and residential uses are covered.                                                                                               
                                                                                                                                
MS.  KING  said  that  those   order  of  magnitude  figures  are                                                               
consistent with some  of the previous studies.   She reminded the                                                               
committee that  FERC will require  an in-state needs  study prior                                                               
to  an open  season  in  order to  address  services of  in-state                                                               
needs.                                                                                                                          
                                                                                                                                
4:15:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO, upon  determining no one else  wished to testify,                                                               
announced that public testimony is closed.                                                                                      
                                                                                                                                
4:15:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EDGMON posed a situation  in which the legislation                                                               
is passed, signed  by the governor, and is fairly  similar to the                                                               
legislation  as  it  stands  today.   He  surmised  that  such  a                                                               
situation would be  unacceptable to the producers  and they won't                                                               
be able  to participate.   Therefore, he questioned where  such a                                                               
situation would leave the producers.                                                                                            
                                                                                                                                
MR. VAN  TUYL said if CSHB  177(O&G) passes, BP wouldn't  be in a                                                               
position to submit a bid.   He reminded the committee that BP, in                                                               
its testimony,  has highlighted  the chief  concerns it  has that                                                               
would  need  to  be  addressed  to place  BP  in  a  position  of                                                               
submitting a  bid.  Mr.  Van Tuyl  emphasized that BP  hopes that                                                               
the legislation will arrive in a  structure that will allow BP to                                                               
submit a  bid because BP wants  to be able  to submit a bid.   He                                                               
related  that  the  company  will   be  focused  on  getting  the                                                               
legislation in  a structure  that allows  the maximum  chance for                                                               
the construction of a gasline.                                                                                                  
                                                                                                                                
4:17:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EDGMON  asked  whether  his  characterization  of                                                               
fundamental differences is an overstatement.                                                                                    
                                                                                                                                
MR.  MCMAHAN confirmed  that  there  are fundamental  differences                                                               
with  CSHB  177(O&G).    As   currently  drafted,  AGIA  is  very                                                               
prescriptive in the way in which  the state expects a proposal to                                                               
be tabled.   Mr.  McMahan noted his  agreement with  Mr. Massey's                                                               
earlier testimony that  AGIA in its current  form actually limits                                                               
competition.      Therefore,    Mr.   McMahan   recommended   the                                                               
substitution of  less prescriptive legislation that  clearly lays                                                               
out the objectives  the state has, invites  applicants to propose                                                               
how  to  best  meet  those objectives,  and  specifies  selection                                                               
criteria that  the state  will use  to determine  which applicant                                                               
best meets the state's objectives.                                                                                              
                                                                                                                                
4:19:08 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO recalled  that Ms. King suggested use  of the term                                                               
"bid variables"  rather than "must-haves."   He opined  that "bid                                                               
variables" sounds  completely like the  previous administration's                                                               
goal of  having the  [applicants] tell the  state what  they need                                                               
and  the state  giving it  to  [the applicant].   Co-Chair  Gatto                                                               
identified the aforementioned as the  problem.  The very issue is                                                               
that the "must haves" are  very tolerable, although they do limit                                                               
the competition in some ways.   The legislature wants a pipeline,                                                               
he  stressed.     He  then   related  his  expectation   that  an                                                               
independent company will  have the most interest  in the gasline.                                                               
The producers, he  opined, seem to be saying that  they might not                                                               
bid,  but fall  short of  saying that  they won't  bid.   He then                                                               
highlighted the magnitude of this  project in terms of importance                                                               
to Alaska and the country as  a whole.  Co-Chair Gatto begged the                                                               
producers to not  give up on this project.   He informed everyone                                                               
that the committee would consider  amendments on Monday and as of                                                               
yet he hasn't received any from  the producers.  He mentioned his                                                               
hope  that the  producers  will provide  some amendments  Monday.                                                               
Co-Chair Gatto then passed out amendments to the committee.                                                                     
                                                                                                                                
[HB 177 was held over.]                                                                                                         

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