Legislature(2009 - 2010)BARNES 124

03/08/2010 06:00 PM RESOURCES


Download Mp3. <- Right click and save file as

Audio Topic
06:26:24 PM Start
06:27:33 PM HB369
09:05:58 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 6:30 pm Today --
+= HB 369 IN-STATE PIPELINE MANAGER/TEAM/COMMITTEE TELECONFERENCED
Heard & Held
Continue Discussion of Fiscal Notes
             HB 369-IN-STATE PIPELINE/ MANAGER/TEAM                                                                         
                                                                                                                                
CO-CHAIR  NEUMAN announced  that the  only order  of business  is                                                               
HOUSE BILL NO.  369, "An Act relating to an  in-state natural gas                                                               
pipeline,  the office  of in-state  gasline project  manager, the                                                               
Joint  In-State  Gasline  Development   Team,  and  the  In-State                                                               
Gasline  Steering  Committee;  and  providing  for  an  effective                                                               
date."                                                                                                                          
                                                                                                                                
6:27:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   JOHNSON  moved   to  adopt   the  proposed   committee                                                               
substitute (CS)  for HB 369,  labeled 26-LS1527\E,  Cook, 3/2/10,                                                               
("Version E"), as the working document.                                                                                         
                                                                                                                                
CO-CHAIR  NEUMAN   objected  for  explanation  purposes   of  the                                                               
differences between the original bill and Version E.                                                                            
                                                                                                                                
TOM  WRIGHT, Staff,  Representative Mike  Chenault, Alaska  State                                                               
Legislature,   explained   that   Version  E   incorporates   the                                                               
committee's  amendments that  have  been adopted  to  date.   The                                                               
partially  exempt  service  for   the  in-state  gasline  project                                                               
manager  was  changed  to  exempt service,  a  change  which  was                                                               
requested by the administration.   The words "the greatest number                                                               
of" were deleted from page 3,  [line 19 of the original version],                                                               
so  as  not  to  pre-determine  the route  of  the  gasline.    A                                                               
representative of  the Denali  Borough was added  to the  list of                                                               
steering committee members.   Lastly, the language  ", except for                                                               
requests from the Alaska Gasline  Inducement Act coordinator ..."                                                               
was inserted  on page 4, line  13 of the original  version, after                                                               
the second "and".                                                                                                               
                                                                                                                                
6:29:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  removed his objection  to adopting Version  E as                                                               
the working document.  There  being no further objection, Version                                                               
E was before the committee.                                                                                                     
                                                                                                                                
6:30:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  moved  to  adopt   Amendment  1,  labeled  26-                                                               
LS1527\E.1,   Cook,   3/8/10,   written  as   follows   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     Page 3, line 13:                                                                                                           
          Delete "by July 1, 2011, and take actions                                                                             
     necessary"                                                                                                                 
                                                                                                                                
     Page 3, line 14:                                                                                                           
          Delete "2015."                                                                                                        
          Insert "2016.  The development team shall make a                                                                      
     commercial offering  by July 1,  2011.   The commercial                                                                    
     offering must consist of the  issuance of a request for                                                                    
     proposals  to potential  in-state natural  gas pipeline                                                                    
     project  developers  who  will  own the  project  or  a                                                                    
     portion of it.  The  request for proposals must require                                                                    
     that commercial  evaluations in the proposals  be based                                                                    
     on engineering  and permitting  completed by  the state                                                                    
     and   its  contractors   and  that   proposals  include                                                                    
     reimbursement  for the  cost incurred  by the  state of                                                                    
     data  and  interpretation  of  data.  The  request  for                                                                    
     proposals must  include notice  that proposals  will be                                                                    
     analyzed  by   the  state,  together  with   terms  and                                                                    
     conditions for  selection.  The development  team shall                                                                    
     report to  the legislature  on the date  the commercial                                                                    
     offering is ready."                                                                                                        
                                                                                                                                
     Page 3, line 30:                                                                                                           
          Delete "for construction of"                                                                                          
          Insert "to meet construction deadlines for"                                                                           
                                                                                                                                
     Page 4, line 6:                                                                                                            
          Delete "by July 1, 2011, and report to the                                                                            
     legislature by that date"                                                                                                  
          Insert "to enable natural gas to flow down the                                                                        
     pipeline by 2016"                                                                                                          
                                                                                                                                
REPRESENTATIVE KAWASAKI objected.                                                                                               
                                                                                                                                
6:30:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN requested Mr. Wright to explain Amendment 1.                                                                    
                                                                                                                                
MR.  WRIGHT  responded that  Amendment  1  was forwarded  at  the                                                               
request of  the administration.   He deferred to Mr.  Bob Swenson                                                               
for further explanation.                                                                                                        
                                                                                                                                
6:31:51 PM                                                                                                                    
                                                                                                                                
ROBERT  SWENSON, Project  Manager, In-State  Gas Project,  Alaska                                                               
Mental   Health  Trust   Land  Office,   Department  of   Natural                                                               
Resources, in response  to Co-Chair Neuman, stated  his title has                                                               
not  changed  since he  took  this  position  and he  thinks  his                                                               
position is similar  to the one discussed in HB  369.  In further                                                               
response, he  said that  in reference  to HB  369 he  assumes his                                                               
duties and  authorities are  the same as  those for  the proposed                                                               
project manager.                                                                                                                
                                                                                                                                
6:32:53 PM                                                                                                                    
                                                                                                                                
MR.  SWENSON,   in  additional   response  to   Co-Chair  Neuman,                                                               
explained  that  Amendment  1   talks  specifically  to  ensuring                                                               
construction  readiness  by  July  1,  2011.    The  fiscal  note                                                               
presented to  the committee  last week  relates in  particular to                                                               
the engineering  necessary to bring  a project of  this magnitude                                                               
to  construction-readiness  by that  time  frame  beyond what  is                                                               
currently going on  in the project.  This  would include bringing                                                               
to fruition, as of July 1,  2011, the Class 4 cost estimates, the                                                               
permitting process  from the right-of-way, and  the Environmental                                                               
Impact Statement  (EIS) process.   He said the first  two changes                                                               
proposed by Amendment 1 in regard to  page 3, lines 13 and 14, of                                                               
Version  E,  would put  the  project  on the  current  fast-track                                                               
timeline that  the engineers in  his project are  already working                                                               
on  and would  bring  the  entire project  into  readiness for  a                                                               
commercial offering as initiated last year by Mr. Harry Noah.                                                                   
                                                                                                                                
6:35:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  inquired why not  keep the ball rolling  as fast                                                               
as possible and why take out the deadline of July 1, 2011.                                                                      
                                                                                                                                
MR. SWENSON replied  the ball is already rolling  on the project,                                                               
and  the  timeline  is an  accelerated,  fast-track  timeline  to                                                               
ensure gas  is flowing by 2016.   In regard to  removing the 2011                                                               
language, he said  the ongoing engineering work  will provide the                                                               
cost of  transport analysis  for a  number of  different options,                                                               
and   will   enable   looking  at   the   various   options   and                                                               
configurations of  the pipeline so  that the pipe can  be ordered                                                               
once  the engineering  process is  finalized.   If  a process  is                                                               
started  to meet  that  deadline  of July  1,  2011, the  initial                                                               
costing,  options, and  engineering will  not have  been done  to                                                               
make that analysis.                                                                                                             
                                                                                                                                
6:36:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN asked what was  the original timeline proposed by                                                               
Mr. Noah.                                                                                                                       
                                                                                                                                
MR. SWENSON answered  he believes that on December  14, 2009, Mr.                                                               
Noah proposed  a timeline of  2015, which  at that time  Mr. Noah                                                               
stated  was a  very  aggressive  timeline.   At  that time,  [Mr.                                                               
Noah's  team] felt  the primary  gas  source would  be the  Gubik                                                               
field in the foothills of the  Brooks Range, which has a very dry                                                               
methane  gas  similar to  Cook  Inlet  gas that  requires  little                                                               
processing compared  to Prudhoe  Bay gas.   However,  the project                                                               
team has  since moved to looking  at gas from the  Prudhoe Bay or                                                               
Point Thomson  area.  That  gas requires a significant  amount of                                                               
processing to  remove the 12  percent carbon dioxide, as  well as                                                               
the  hydrogen sulfide  and other  impurities; this  increases the                                                               
timeline for putting gas into a pipeline by one year to 2016.                                                                   
                                                                                                                                
6:37:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN said several options  are being looked at and all                                                               
of those options were considered when  the date was put forth, so                                                               
he is therefore resistant to  taking out the time-specific dates.                                                               
He inquired what would happen if the dates stayed in the bill.                                                                  
                                                                                                                                
MR. SWENSON  responded that  the 2015 and  2016 dates  are goals.                                                               
He said it  is important to understand the  process necessary for                                                               
getting to  the point of  ordering pipe and determining  the pipe                                                               
configuration.   A  number  of aspects  within  the timeline  are                                                               
beyond the  team's control,  such as  the permitting  process and                                                               
the  availability  of pipe  and  facilities.   He  requested  the                                                               
engineers  to  provide him  with  three  different timelines,  he                                                               
related:     a  very  aggressive  fast-track   timeline,  a  more                                                               
realistic  timeline that  considered the  possibility of  delays,                                                               
and a timeline of certainty.   The timelines he was provided were                                                               
2016,  2017, and  2018  respectively.   He  added  that Mr.  Bill                                                               
Sparger (ph),  an engineer with  40 years experience  in pipeline                                                               
construction,  is available  online to  answer questions  in this                                                               
regard.                                                                                                                         
                                                                                                                                
CO-CHAIR  NEUMAN understood  that missing  a sea-lift  for a  gas                                                               
treatment facility  at Prudhoe  Bay could throw  things off  by a                                                               
year; another option is a  gas treatment facility on the southern                                                               
end of  the gas pipeline.   The aggressive timelines are  what he                                                               
likes best about this bill, he said.                                                                                            
                                                                                                                                
6:41:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  inquired why  the  Gubik  gas field  is  no                                                               
longer considered an option.                                                                                                    
                                                                                                                                
MR. SWENSON  replied that  what he meant  was during  the initial                                                               
phase  of this  project  the  primary gas  source  was the  Gubik                                                               
field.   "Anadarko" has drilled wells  in the Gubik field  and is                                                               
in  the process  of analyzing  them,  so the  Gubik reserves  are                                                               
currently  unknown.   The  project  team  has since  changed  the                                                               
primary target to  the North Slope/Prudhoe Bay  region, and while                                                               
the Gubik field  is still an option, it is  no longer the primary                                                               
option.                                                                                                                         
                                                                                                                                
6:42:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK surmised  the reason why the  North Slope has                                                               
become the priority is because  an understanding of the Gubik gas                                                               
field is not as far as had been expected.                                                                                       
                                                                                                                                
MR.  SWENSON  answered yes.    He  explained  that in  any  large                                                               
project it  is very  important to  have reserves  and there  is a                                                               
difference  between  reserves  and   resources.    Resource  just                                                               
indicates how  much gas  is thought to  be there,  while reserves                                                               
are  actually booked  with the  number of  well penetrations  and                                                               
there  is a  very good  technical understanding  of the  resource                                                               
that is  available.  A  sequence of  looking at reserves  must be                                                               
undertaken  to finance  any  large  project like  this.   If  the                                                               
reserves were actually booked in  the Gubik field and were enough                                                               
to provide resource to this gas  pipeline, then it would become a                                                               
very viable option in that process.                                                                                             
                                                                                                                                
6:43:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  asked how  long it will  take for  the Gubik                                                               
field to become a reserve of known quantity.                                                                                    
                                                                                                                                
MR. SWENSON responded  that that is up to the  level of drilling,                                                               
the developer  of that field, and  how many wells can  be drilled                                                               
in a  season.  The Gubik  field is in  a very remote area  by the                                                               
Colville  River  in  the  central  North  Slope  area.    Access,                                                               
permitting, and the  number of wells that can be  drilled in such                                                               
a  remote area  is therefore  limited.   The number  of wells  it                                                               
would take  to actually delineate  that resource is  unknown, but                                                               
it would take a number of wells to  do that.  It is not years and                                                               
years away, but it is certainly a number of seasons away.                                                                       
                                                                                                                                
6:44:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  inquired as  to the reason  for deleting                                                               
"and take actions necessary" [from page 3, line 13].                                                                            
                                                                                                                                
MR. SWENSON  replied that his  project is currently in  the first                                                               
phase of  the engineering  process, which  is the  engineering to                                                               
define  the  cost  of  transport.     Getting  to  the  point  of                                                               
sanctioning   a  project   and  construction-readiness   takes  a                                                               
significant  amount  of additional  engineering.    It will  take                                                               
another two to three years to  use that initial cost of transport                                                               
in  evaluations  of the  16  different  options, determine  which                                                               
option  makes the  most  sense,  and then  do  the very  detailed                                                               
engineering on that option.  To  be construction ready by July 1,                                                               
2011,  would require  stopping the  current  costing process  and                                                               
immediately picking a specific option  and moving forward on that                                                               
engineering.   It is the  detailed cost engineering that  takes a                                                               
project to the  point of sanction, he explained,  and Mr. Sparger                                                               
could provide further details.                                                                                                  
                                                                                                                                
6:47:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI noted  there are  other sections  within                                                               
Version E  that say take  any actions necessary  for construction                                                               
to  begin; for  example, page  4, lines  5-6.   He surmised  that                                                               
these lines and others would also  need to be amended in order to                                                               
follow the same line of logic.                                                                                                  
                                                                                                                                
MR. SWENSON answered correct.                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN reiterated  that he is resistant  to changing the                                                               
July 1, 2011, deadline.                                                                                                         
                                                                                                                                
6:48:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  requested Mr.  Swenson to  address what  a one-                                                               
year delay would cost in terms of time value of money.                                                                          
                                                                                                                                
MR. SWENSON responded he cannot  address that from the standpoint                                                               
of  time value  of money,  but  he can  address the  efficiencies                                                               
afforded  by  that  additional   engineering  work.    Under  his                                                               
project's  current schedule,  the costing  for transport  will be                                                               
done on the 16 different scenarios  by July 2010.  There are four                                                               
different  pipeline  configurations  and a  number  of  different                                                               
throughput scenarios  from 250 million  cubic feet per day  on up                                                               
to 1  billion cubic feet  per day.   Those ongoing  analyses will                                                               
provide an understanding of the  options available, including the                                                               
types of  gas found on  the North Slope and  Cook Inlet.   Once a                                                               
specific configuration  is chosen,  the next  phase of  work will                                                               
take  it  through  the  optimization.    A  number  of  different                                                               
processes  in that  engineering  effort help  optimize what  will                                                               
ultimately be built  and sanctioned.  At the end  of that process                                                               
it will  be known what  type and schedule  of pipe is  needed and                                                               
what  the  metallurgy  of  that  pipe  needs  to  be,  given  the                                                               
permafrost and faulting along the  route.  From the standpoint of                                                               
cost  savings in  the overall  project, the  timeline that  he is                                                               
laying out  will optimize the  long-term savings of  the pipeline                                                               
as well as the construction cost savings.                                                                                       
                                                                                                                                
6:50:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN,  in   response  to  Representative  Guttenberg,                                                               
requested that  members stay  focused on the  first [of  the four                                                               
changes] proposed  by Amendment 1.   He stated that  the proposed                                                               
deletion on  page 3,  line 13,  of Version E  may not  sound like                                                               
much, but  it is much because  it takes out  a lot of teeth.   He                                                               
reiterated his hesitation to do this.                                                                                           
                                                                                                                                
CO-CHAIR  JOHNSON said  he shares  Co-Chair  Neuman's concern  in                                                               
regard to  a delay.   He said  he is unsure  that the  year delay                                                               
holds water  because efficiencies will be  gained when additional                                                               
expertise  is  brought  into  the planning.    He  asked  whether                                                               
Amendment 1 is divisible.                                                                                                       
                                                                                                                                
CO-CHAIR NEUMAN responded  that is why he wants to  look at [each                                                               
of the  four changes] individually.   He remained  unconvinced of                                                               
the necessity for deleting the July 1, 2011, deadline.                                                                          
                                                                                                                                
6:54:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG  noted that the development  team would                                                               
be working with  the steering committee, yet there  is no mention                                                               
of when steering committee members  would have to be appointed or                                                               
what  constitutes a  quorum for  starting action.   He  said this                                                               
might need consideration later on.                                                                                              
                                                                                                                                
CO-CHAIR  NEUMAN  agreed.   He  moved  discussion to  the  second                                                               
change proposed by Amendment 1.                                                                                                 
                                                                                                                                
MR.  SWENSON  read aloud  to  the  committee members  the  second                                                               
change proposed by Amendment 1.                                                                                                 
                                                                                                                                
                                                                                                                                
6:56:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON,  in  regard to  the  proposed  second  change,                                                               
inquired whether  the language related to  requests for proposals                                                               
fits  within the  procurement code.   He  further asked  why this                                                               
language needs to be included.                                                                                                  
                                                                                                                                
MR. SWENSON  replied the language  is being provided  to describe                                                               
what a commercial offering is  for the pipeline.  The procurement                                                               
code and the language associated  with the procurement code would                                                               
have to be  followed.  In response to further  questions from Co-                                                               
Chair  Johnson, he  said  the  language has  not  been vetted  by                                                               
"legal" and it  was not written by him or  the administration; it                                                               
was suggestion to the sponsor.   He said he helped Representative                                                               
Chenault's staff member to understand  what a commercial offering                                                               
is in a pipeline bidding.                                                                                                       
                                                                                                                                
[Co-Chair Neuman passed the gavel to Co-Chair Johnson.]                                                                         
                                                                                                                                
6:59:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON said  he thinks  the  term commercial  offering                                                               
should be defined and suggested  that a definition be included at                                                               
the end of the bill.                                                                                                            
                                                                                                                                
MR. SWENSON allowed that that very well may be the case.                                                                        
                                                                                                                                
[Co-Chair Johnson returned the gavel to Co-Chair Neuman.]                                                                       
                                                                                                                                
7:00:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG inquired  why  it  is the  development                                                               
team and  not the project  manager that is making  the commercial                                                               
offering.   He further asked  if the  language on lines  13-14 of                                                               
Amendment  1 directing  the  development team  to  report to  the                                                               
legislature  on the  date  the commercial  offering  is ready  is                                                               
included in  the amendment in  case the offering is  ready before                                                               
July 1, 2011.  He surmised that  it would be a public report with                                                               
a press release.                                                                                                                
                                                                                                                                
MR. SWENSON,  in regard to  a report, responded that  the current                                                               
work being  done on the  project is  the pipeline costing  of the                                                               
different options.  The secondary part  of the project is to look                                                               
at  right-of-way and  permit issues,  and once  those issues  are                                                               
finalized the project  would be ready for  a commercial offering.                                                               
July 1, 2011,  would be a minimum date that  that would be ready.                                                               
If it was ready beforehand,  the legislature would be notified of                                                               
that date.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  GUTTENBERG commented  that  July  1, 2011,  seems                                                               
like a definitive date.                                                                                                         
                                                                                                                                
MR. SWENSON nodded yes.                                                                                                         
                                                                                                                                
7:03:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN asked  whether it is Mr. Swenson's  intent as the                                                               
project  manager to  have all  the permits  ready to  sell to  an                                                               
independent person or company to build an in-state pipeline.                                                                    
                                                                                                                                
MR.  SWENSON replied  correct; it  has always  been the  focus of                                                               
this project  to get  the permitting and  engineering to  a point                                                               
where  it  can  be  put  out  for  a  commercial  offering  to  a                                                               
commercial  entity or  group  of entities  that  would build  the                                                               
pipeline.                                                                                                                       
                                                                                                                                
7:04:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN inquired  whether it means that  the state's ties                                                               
to that information and ownership  of this project are severed if                                                               
the permits are sold to recoup the state's expenditures.                                                                        
                                                                                                                                
MR. SWENSON  answered that that  was the original intent,  as was                                                               
stated  by Mr.  Noah in  his presentation  on December  15, 2009.                                                               
The  project has  continued with  that process  to get  ready for                                                               
that commercial offering; the project  has also been working with                                                               
various  producer   groups  and  pipeline  groups,   as  well  as                                                               
downstream  consumers  of  the  gas.    That  does  not  require,                                                               
however, that the  state not invest in the pipeline.   It is just                                                               
to put it  out for that commercial offering once  the project has                                                               
the permits and detailed costing in hand.                                                                                       
                                                                                                                                
7:05:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  surmised that if  the state severs  ownership it                                                               
would have  no involvement and would  not be beholden to  the 0.5                                                               
billion  cubic  feet  per  day  limitation  on  an  in-state  gas                                                               
pipeline.                                                                                                                       
                                                                                                                                
MR. SWENSON  responded he does  not think it precludes  the state                                                               
from being  involved in the building  of the pipeline.   The only                                                               
thing the commercial offering does is  offer a data set and three                                                               
permits -  the state  and federal  rights-of-way permits  and the                                                               
environmental impact  statement permit - to  a commercial entity.                                                               
It does  not mean the state  is precluded from investing  in that                                                               
process.                                                                                                                        
                                                                                                                                
7:07:26 PM                                                                                                                    
                                                                                                                                
MR.   SWENSON,   in   response  to   Representative   Guttenberg,                                                               
reiterated  that  he  does  not  believe  a  commercial  offering                                                               
precludes  the  state  from  becoming   involved  in  either  the                                                               
financing  portion  of  this,  or in  incentives  on  either  the                                                               
upstream or  downstream side, or  actually being involved  in the                                                               
construction process.                                                                                                           
                                                                                                                                
CO-CHAIR  NEUMAN   commented  that   maybe  the   permanent  fund                                                               
[earnings]  will  finance  the  pipeline, should  the  people  of                                                               
Alaska say so.                                                                                                                  
                                                                                                                                
7:08:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  asked whether Mr.  Swenson would consider  it a                                                               
responsive or non-responsive  bid if someone made a  bid to build                                                               
the pipeline that did not include reimbursement to the state.                                                                   
                                                                                                                                
MR.  SWENSON replied  that the  current  language on  line 11  of                                                               
Amendment   1   suggests   that   the   proposal   must   include                                                               
reimbursement for the cost incurred by  the state.  That does not                                                               
preclude  the  state  from being  involved  in  future  activity,                                                               
future engineering, future bonding, or financing of the project.                                                                
                                                                                                                                
CO-CHAIR  JOHNSON said  he reads  this part  of the  amendment as                                                               
meaning  there would  be a  no-call if  proposals do  not include                                                               
reimbursement for the  cost incurred by the state,  as opposed to                                                               
bringing something forth to the  legislature to decide whether to                                                               
throw the  state's cost into  the pot to  sweeten it so  it would                                                               
reduce tariffs.   He inquired whether this is  also Mr. Swenson's                                                               
understanding.                                                                                                                  
                                                                                                                                
MR. SWENSON  answered that that  is not his understanding  of the                                                               
current language.   He said this language came  from the original                                                               
appropriations which provided that the  work done by Mr. Noah and                                                               
the  pipeline team  was to  be reimbursed  by a  second party  or                                                               
commercial entity that would be building the pipeline.                                                                          
                                                                                                                                
CO-CHAIR  JOHNSON asked  whether  that  is in  statute  or is  an                                                               
understanding of  what Mr. Noah  and the pipeline team  wanted to                                                               
do.                                                                                                                             
                                                                                                                                
MR. SWENSON responded he believes it is in the appropriations.                                                                  
                                                                                                                                
7:11:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  inquired  whether  the  reimbursement                                                               
could be  in reduced  tariffs similar  to what  is in  the Alaska                                                               
Gasline Inducement Act (AGIA).                                                                                                  
                                                                                                                                
MR. SWENSON replied  he believes it could be in  any way that the                                                               
state  becomes  reimbursed  for  that  money.    However,  it  is                                                               
important to  note that some  of the data  that has been  used to                                                               
develop the project  to date is actually data the  state is using                                                               
with its partner, ENSTAR.   Therefore, the state or the purchaser                                                               
would need to reimburse that group for that data set.                                                                           
                                                                                                                                
7:11:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN asked what last  year's appropriation was for the                                                               
in-state gas project.                                                                                                           
                                                                                                                                
MR. SWENSON answered $8.3 million.                                                                                              
                                                                                                                                
CO-CHAIR  NEUMAN  noted  that   the  governor's  budget  included                                                               
another $6.5  million for a  total of  about $15 million.   Thus,                                                               
this portion of Amendment 1 would  put a screeching halt to a lot                                                               
of things  if the state  is unable to  sell the data  and permits                                                               
for at least $15 million.                                                                                                       
                                                                                                                                
MR. SWENSON responded correct.                                                                                                  
                                                                                                                                
7:13:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN further  calculated that the total  cost would be                                                               
more like  $20-$25 million given  that other state  entities have                                                               
been funded  to gather  information, such  as the  Alaska Natural                                                               
Gas Development Authority (ANGDA).                                                                                              
                                                                                                                                
MR. SWENSON replied  that this $25 million invested  by the state                                                               
for the permitting and initial  costing estimates is a very small                                                               
portion of the  overall engineering that must be  completed.  The                                                               
original  fiscal  note  for  the overall  project  is  over  $380                                                               
million just  for the detailed engineering  to get to a  point of                                                               
sanction.  That does not include  the $500 million or greater for                                                               
the  ordering  of  pipe, facilities,  and  cost  associated  with                                                               
building the pipeline.   He believes the amount of  work that has                                                               
been  done  and  currently  underway covers  nearly  all  of  the                                                               
possible options that could be used.   He thinks this part of the                                                               
amendment specifically  speaks to  a pipeline company  not coming                                                               
in without looking at the current  data set done by the state and                                                               
ENSTAR and using  that data for its proposal  and reimbursing the                                                               
state  for that  work.   It  does not  speak to  the hundreds  of                                                               
millions of dollars  of work that will be necessary  to bring the                                                               
project to sanction.                                                                                                            
                                                                                                                                
7:15:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  maintained that this  project would stop  if the                                                               
July 1, 2011, deadline is taken out  and the state does not get a                                                               
proposal  from  a  company  who  wants to  own  the  project  and                                                               
reimburse the state.                                                                                                            
                                                                                                                                
MR. SWENSON answered  he does not believe that is  correct and an                                                               
alternate  interpretation would  be  that if  a  proposal is  not                                                               
received using the data and  right-of-way permits provided by the                                                               
state, then the  state can choose to move forward  with either an                                                               
alternate commercial offering or  continuation of the engineering                                                               
that is ongoing.  There will  not be a break in time specifically                                                               
for that.   Amendment  1 attempts to  provide an  opportunity for                                                               
the state  and its partners  to be  reimbursed for the  work that                                                               
has been done to date, and that is all it does.                                                                                 
                                                                                                                                
7:16:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  said that if a  company wanting to build  an in-                                                               
state pipeline  uses none of  the state's information,  then none                                                               
of  this matters.   If  a company  uses the  state's information,                                                               
which  is the  hope, then  the state  gets some  reimbursement on                                                               
those  costs; however,  he doubts  reimbursement will  be at  100                                                               
percent.   He interpreted Mr. Noah  to have been saying  that the                                                               
project will attempt  to recover the maximum  amount possible and                                                               
hand  the project  off to  private industry.   Under  the current                                                               
language in Amendment 1, he  believes the state would be required                                                               
to receive  100 percent of its  costs and if this  did not happen                                                               
the project would be stopped.                                                                                                   
                                                                                                                                
MR.  SWENSON responded  he does  not  believe it  would stop  the                                                               
project; rather,  it would stop  the process of that  request for                                                               
proposals.                                                                                                                      
                                                                                                                                
CO-CHAIR NEUMAN  said it  would stop the  process of  the request                                                               
for proposals for building an in-state gas pipeline.                                                                            
                                                                                                                                
MR.  SWENSON offered  his belief  that the  reasoning behind  the                                                               
language in Amendment 1 is to  attempt to reimburse the state for                                                               
the costs  to date, as  was always  stated from the  beginning of                                                               
this  project.   If  this language  is not  included,  it is  his                                                               
belief  that a  commercial  entity coming  into  the request  for                                                               
proposals would not offer that reimbursement of costs.                                                                          
                                                                                                                                
7:18:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  suggested it could  be said that the  state will                                                               
do the best it can to make back  as much of the invested money as                                                               
possible.   There is a direct  long-term benefit to the  state in                                                               
providing jobs, he said, and he  will be looking at the amendment                                                               
further in this regard.                                                                                                         
                                                                                                                                
MR. SWENSON said he understood.                                                                                                 
                                                                                                                                
7:19:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON inquired whether  treble damages would be queued                                                               
if the state took delayed payments  for its costs or did not take                                                               
all the payments at once.                                                                                                       
                                                                                                                                
MR. SWENSON replied he does not know the answer at this time.                                                                   
                                                                                                                                
CO-CHAIR JOHNSON added  that delayed payments would  be a benefit                                                               
of  getting to  use  the state's  money over  a  period of  time.                                                               
However, he said he is pretty  sure that the intent of AGIA would                                                               
be violated  if the state also  offered the benefit to  a company                                                               
of a pipeline  that carries over 0.5 billion cubic  feet per day.                                                               
While that is a policy call that  would be made at that time, the                                                               
way this part  of Amendment 1 is structured the  state would have                                                               
a  problem   if  a   check  is  not   written  for   100  percent                                                               
reimbursement and the  pipeline is designed for  over 0.5 billion                                                               
cubic  feet  per day.    He  said he  wants  to  ensure that  the                                                               
legislature  has  that  policy  call  and  not  some  procurement                                                               
officer  writing  a request  for  proposals  with this  language.                                                               
When the  request for proposals is  issued, he wants it  to be as                                                               
broad and  open as it  can possibly be to  get as many  people at                                                               
the playing table  as possible and this portion  of the amendment                                                               
does not do that.                                                                                                               
                                                                                                                                
7:21:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  recognized that the reason  for deleting "by                                                               
July 1,  2011, and  take actions necessary"  is because  there is                                                               
still a  lot of study  to do on the  16 different options  with 4                                                               
different  configurations; therefore,  additional time  is needed                                                               
because the  state does not  want to  commit in one  direction or                                                               
another.   However,  the second  change proposed  by Amendment  1                                                               
would require  a commercial offering by  July 1, 2011.   He asked                                                               
what the  state would  have for the  commercial offering  that is                                                               
different  than  what  the  state  would  have  in  the  original                                                               
committee substitute  which states  that an in-state  natural gas                                                               
pipeline would be begun by July 1, 2011.                                                                                        
                                                                                                                                
MR. SWENSON  answered it is  important to understand  the process                                                               
of building  a pipeline of this  magnitude.  The work  started by                                                               
Mr. Noah and  Mr. Noah's team, which  is the work that  he is now                                                               
continuing, is  the initial  costing - the  initial look  at what                                                               
different  configurations  of  the   pipeline  are  feasible  and                                                               
looking at what that cost of  transport is.  Those cost estimates                                                               
and that  engineering are significantly  less than being  able to                                                               
construct.   This  initial scoping  of  the project  is what  any                                                               
reasonable pipeline  company would do.   To get to a  position of                                                               
construction-ready the  project must  be taken  to a  much higher                                                               
level of  engineering.  A  significant amount of  detailed design                                                               
work is needed  to get the project from the  Class 4 estimates to                                                               
Class 3 and 2  estimates, and to get to the  point where pipe can                                                               
be  ordered or  the  project  sanctioned.   Once  the project  is                                                               
sanctioned, a  significant amount of engineering  design work has                                                               
been done, as  well as hazards work, and work  along the pipeline                                                               
route to  ensure optimal location  of the  pipeline.  All  of the                                                               
initial scoping  work will  be done  by July  of this  summer, at                                                               
which point all of the options  will have been worked through and                                                               
the cost  of transport completed.   Work  will then begin  on the                                                               
cost of  service from  the North  Slope to  consumers.   The next                                                               
phase  of engineering  is very,  very detailed  engineering.   He                                                               
said Mr.  Sparger is  available to explain  these details  if the                                                               
committee wishes.                                                                                                               
                                                                                                                                
7:25:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK understood  that what the state  will have by                                                               
July 1,  2011, is  the basic  scoping and  cost for  a commercial                                                               
offering.    A  much  higher level  of  detailed  engineering  is                                                               
necessary  to actually  get the  project underway.   He  surmised                                                               
that by  having July  1, 2011, remain  in the  original committee                                                               
substitute, the  expectation would be  that the project  is ready                                                               
to  build; however,  the state  will not  be there  at that  time                                                               
because all that will be done  by then is a general cost estimate                                                               
of transportation.                                                                                                              
                                                                                                                                
MR. SWENSON responded correct.                                                                                                  
                                                                                                                                
REPRESENTATIVE  TUCK   noted  that  "Baker  and   Associates"  is                                                               
performing much  of the  current work.   He inquired  whether the                                                               
duration of  this consultant's services  will be beyond or  up to                                                               
July 1, 2011.                                                                                                                   
                                                                                                                                
MR. SWENSON replied the current contract runs to July 1, 2011.                                                                  
                                                                                                                                
REPRESENTATIVE  TUCK presumed  that under  this second  change in                                                               
Amendment 1,  the hope  is for  the state  to get  reimbursed for                                                               
"cost incurred by the state  of data and interpretation of data."                                                               
He asked whether  in addition to the cost of  gathering the data,                                                               
the cost includes any legal or financial interpretation.                                                                        
                                                                                                                                
MR.   SWENSON   answered   that   specifically   the   data   and                                                               
interpretation  of the  data is  the engineering  work for  those                                                               
cost estimates,  which is the work  that has been done  by "Baker                                                               
and Associates" and their subcontractors.                                                                                       
                                                                                                                                
7:28:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN called  attention to the language  on lines 12-13                                                               
of  Amendment 1  which states,  "The request  for proposals  must                                                               
include  notice that  proposals will  be analyzed  by the  state,                                                               
together with  terms and conditions  for selection."  He  said he                                                               
thinks the  intent of HB 369  is to have an  in-state natural gas                                                               
development team be  independent of that because  right now there                                                               
is a lot  of concern that the current in-state  gas pipeline team                                                               
does not  have enough independence.   He inquired  whether people                                                               
within  the administration  will analyze  the proposals  and have                                                               
the ability to decide whether to accept them.                                                                                   
                                                                                                                                
MR. SWENSON responded the analysis  of the proposals will be done                                                               
from fiscal and technical standpoints  and looking at whether the                                                               
company  proposing  to  build  the project  has  the  ability  to                                                               
complete a  project like this.   Contractors will be hired  to do                                                               
that analysis  because there is  not the full  expertise in-house                                                               
to  make  determinations  on the  detailed  engineering  and  the                                                               
costing.  Therefore, it will be both the state and contractors.                                                                 
                                                                                                                                
CO-CHAIR NEUMAN surmised Mr. Swenson's answer was yes.                                                                          
                                                                                                                                
MR. SWENSON replied yes.                                                                                                        
                                                                                                                                
7:30:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN said  he still  has concern  about getting  full                                                               
reimbursement  of the  costs.   He  understood  Mr. Swenson  will                                                               
depend upon  outside analysis  and experts  on this,  and allowed                                                               
that peer  review is a  good thing.   He further  understood that                                                               
this  means the  administration, not  the development  team, will                                                               
decide whether to move forward on this.                                                                                         
                                                                                                                                
MR. SWENSON  answered he believes  the development  team proposed                                                               
by  HB  369  would  be   the  primary  group  that  analyzes  the                                                               
proposals, not a single entity.                                                                                                 
                                                                                                                                
CO-CHAIR NEUMAN understood the proposals  will be analyzed by the                                                               
state and if the state makes a  finding that it does not like the                                                               
proposals it can say no and not accept the proposals.                                                                           
                                                                                                                                
MR. SWENSON responded correct.                                                                                                  
                                                                                                                                
7:31:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  asked whether  any of  the 16  different options                                                               
include a  cost analysis for  both a  48-inch gas pipeline  and a                                                               
24-inch line from Prudhoe Bay to tidewater.                                                                                     
                                                                                                                                
MR. SWENSON replied  the work he is  specifically discussing here                                                               
is just  for the 24-inch line  from the North Slope  to tidewater                                                               
in the Cook  Inlet, with offtake points in Fairbanks.   There are                                                               
numerous  other options  for bringing  gas from  the North  Slope                                                               
into the Railbelt  region.  As proposed from  the very beginning,                                                               
this project  has been worked  as a backup  plan in case  AGIA is                                                               
not finalized  in a timely  manner.   If AGIA is  sanctioned, the                                                               
necessity of running  a 24-inch line to the North  Slope would no                                                               
longer exist.   So, if  [an AGIA  pipeline] is not  sanctioned by                                                               
the time  the "stand-alone" line  is ready, then the  state would                                                               
continue with  the stand-alone line  and the  [pipeline capacity]                                                               
issue of more than 500 million  cubic feet per day becomes a non-                                                               
issue because there would be no AGIA at that point in time.                                                                     
                                                                                                                                
CO-CHAIR NEUMAN understood  Mr. Swenson to be looking  at this as                                                               
a Plan B should a large diameter pipeline not work.                                                                             
                                                                                                                                
MR. SWENSON answered  correct.  It has been stated  from the very                                                               
beginning of  this project that it  is a backup plan  to the AGIA                                                               
process, or  a large  diameter line  from the  North Slope.   The                                                               
cost  associated with  gas from  a large  diameter line  into the                                                               
Railbelt would be  - just from the standpoint of  distance - much                                                               
less than gas from a single 24-inch line from the North Slope.                                                                  
                                                                                                                                
7:34:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN stated he does not think  of this as a Plan B and                                                               
that there  is room for both  projects to move forward.   He said                                                               
he is  very frustrated to be  hearing this project is  Plan B and                                                               
he believes the proposed provisions  on lines 6-14 of Amendment 1                                                               
are more roadblocks.                                                                                                            
                                                                                                                                
MR. SWENSON  replied that  when he  mentioned Plan  B he  was not                                                               
suggesting that  his team is moving  forward as a Plan  B.  There                                                               
is  no plan  to slow  down the  ongoing planning  and engineering                                                               
process,  he stressed.   It  will continue  in parallel  with the                                                               
ongoing  planning process  for the  large  diameter [AGIA]  line.                                                               
When he says  Plan B, he means  it is a backup plan  to the large                                                               
diameter  pipeline  because the  gas  associated  with a  48-inch                                                               
line,  and  the state's  ability  to  access  that gas,  will  be                                                               
significantly cheaper  than building  a line  to the  North Slope                                                               
and the tariff  associated with that.  It does  not mean his team                                                               
is slowing down or changing the  process in any way while working                                                               
in consort.   He  stated his belief  that when  testifying before                                                               
the legislature  Mr. Noah  presented very  similar views  of this                                                               
project.  The team is working  incredibly hard to ensure that the                                                               
state has this as an option for in-state gas.                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN continued to disagree with Mr. Swenson.                                                                         
                                                                                                                                
7:38:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON said  Co-Chair Neuman  is going  down the  same                                                               
road he  is.   He inquired  whether Mr. Swenson  knows why  he is                                                               
before the committee today and why HB 369 was introduced.                                                                       
                                                                                                                                
MR.  SWENSON assumed  it  is the  frustration  associated with  a                                                               
pipeline not being built currently.                                                                                             
                                                                                                                                
CO-CHAIR JOHNSON  said that is a  very good assumption.   He said                                                               
another reason  is that it also  appears to him that  a civil war                                                               
is going on  in the administration.  He said  this project is not                                                               
a  Plan  B  for  the  citizens he  represents;  rather,  the  big                                                               
pipeline ought  to be Plan  B.  His  priority is getting  gas for                                                               
Alaskans.    He said  he  is  prepared  to withdraw  Amendment  1                                                               
because he sees nothing but delays  and there is nothing in it so                                                               
far that excites him.                                                                                                           
                                                                                                                                
MR. SWENSON  stated he  and Co-Chair Johnson  are exactly  on the                                                               
same  page.   His first  priority is  getting gas  as quickly  as                                                               
possible  to the  citizens of  Alaska,  and that  is his  primary                                                               
objective in his job.   When he says Plan B he  is not meaning it                                                               
has to be  at a later date  or is an either/or  proposition.  The                                                               
way his  team is  working right  now on this  project is  to make                                                               
sure that  the state has  availability of North Slope  gas, which                                                               
is currently  stranded, into  the Railbelt region.   His  team is                                                               
working as  quickly as  it can  with the  budgets that  have been                                                               
provided.   The team is on  track, under budget, and  gas will be                                                               
supplied to the Railbelt whether it  be via a stand-alone line or                                                               
a  large  diameter  pipeline,  if   the  projects  move  forward.                                                               
Amendment 1 is  specifically to put the state in  the position of                                                               
being able to go through  the engineering effort that is required                                                               
to  put  together a  project  of  this  magnitude and  provide  a                                                               
commercial offering as of July  1, 2011, and, currently, his team                                                               
is  on  track with  that.    The  project will  continue  forward                                                               
depending  upon what  the commercial  offering provides  and also                                                               
depending upon what  the legislature decides to do  at that point                                                               
in time  as far as investment  in the pipeline and  continuing on                                                               
with the project  to fruition for providing gas to  both the Cook                                                               
Inlet and Fairbanks regions.                                                                                                    
                                                                                                                                
7:43:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  surmised that from  what Mr. Swenson  is saying                                                               
this legislation is not needed.                                                                                                 
                                                                                                                                
MR. SWENSON  responded he cannot address  whether the legislation                                                               
is  absolutely necessary.    He said  he believes  a  lot of  the                                                               
language in  HB 369  is being undertaken  by his  team, including                                                               
talking with  the other agencies and  making sure there is  not a                                                               
civil  war.     He  has  worked  with  the   Alaska  Natural  Gas                                                               
Development   Authority    (ANGDA)   and   the    Department   of                                                               
Transportation &  Public Facilities  (DOT&PF).   He is  more than                                                               
willing  to  work  with  any  of the  other  state  agencies  and                                                               
entities, including  the Alaska  Railroad and the  Alaska Housing                                                               
Finance  Corporation, to  ensure  continued  development of  this                                                               
project.   His team is  moving forward in  as quick a  fashion as                                                               
possible and is trying to ensure  that it is an optimized project                                                               
that  will  cost  the  least  amount of  money  and  provide  the                                                               
majority of the  gas to the majority of the  people in the state.                                                               
He  said he  thinks  the legislation  as  currently written  will                                                               
cause  significant  issues with  his  team's  ability to  do  the                                                               
engineering that  will optimize that  work.  The  amendments were                                                               
initially offered  to help  stay on  the track  that his  team is                                                               
currently on and move the project forward.                                                                                      
                                                                                                                                
7:44:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN presumed that Mr.  Swenson is about as frustrated                                                               
now as Mr. Noah  was when Mr. Noah left.  He  posed a scenario in                                                               
which a 48-inch line is built  from Prudhoe Bay to Fairbanks that                                                               
can carry  5.5 billion cubic feet  per day, which would  make 1.0                                                               
billion  cubic feet  per day  available for  in-state.   The cost                                                               
estimates he has  seen on such a line range  from a difference of                                                               
$1.3 billion  to $1.7 billion  between a  24-inch line and  a 48-                                                               
inch line, so he is assuming  a medium difference between the two                                                               
lines of $2 billion.  Pumping  4 billion cubic feet per day would                                                               
take four compression  stations at $250 million each  for a total                                                               
of $1 billion.   To run those operating costs  and the write-down                                                               
of  those  plants in  five  or  six  years  would be  another  $1                                                               
billion.   If both these  projects are continued,  the compressor                                                               
that  is in  the Prudhoe  Bay gas  treatment plant  can move  1.0                                                               
billion cubic  feet of gas  per day down  a 48-inch line  with no                                                               
additional  compressor stations.   So  now, $2  billion has  been                                                               
eliminated from  the cost to  still have the availability  of 1.0                                                               
billion cubic  feet per day  of gas  in-state and still  have the                                                               
availability  to add  four  compressors.   This  would keep  both                                                               
projects as Plan A.                                                                                                             
                                                                                                                                
7:48:49 PM                                                                                                                    
                                                                                                                                
MR.  SWENSON  replied  he  is   unsure  on  the  math  and  costs                                                               
associated with  the aforementioned scenario.   He said  the pre-                                                               
build line from  the North Slope to Fairbanks  has been discussed                                                               
by his team, and  he thinks it is a viable  option that should be                                                               
considered as  things move forward  as there would be  time value                                                               
of money,  as was  discussed earlier.   The amount  of investment                                                               
associated with building a 48-inch  line and compressor stations,                                                               
or at  least being ready  if a  large export market  is developed                                                               
and building from that 48-inch  line whether through Canada or to                                                               
a liquefied natural gas (LNG)  facility in Valdez, must be looked                                                               
at  very   carefully.    He   agreed  that   maximizing  resource                                                               
development on the  North Slope must be looked at  for all of the                                                               
options.   The  North Slope  has a  significant resource  and the                                                               
ability to  access that gas and  get it to market  is critical in                                                               
the way  forward of the state;  the state must make  sure to stay                                                               
open to all of the options.                                                                                                     
                                                                                                                                
7:50:11 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  said the goal  is to provide the  maximum amount                                                               
of gas  to as many people  as possible, whether those  people are                                                               
Canadian or  Alaskan.   He said  he thinks  the scenario  he just                                                               
presented  should  be the  number  one  scenario  if it  has  not                                                               
already been included as one  of the 16 scenarios currently under                                                               
consideration.                                                                                                                  
                                                                                                                                
CO-CHAIR JOHNSON withdrew Amendment 1.                                                                                          
                                                                                                                                
CO-CHAIR  NEUMAN commented  that  the withdrawal  of Amendment  1                                                               
will give members more time to consider it.                                                                                     
                                                                                                                                
7:54:00 PM                                                                                                                    
                                                                                                                                
MR.  SWENSON, in  response to  Co-Chair Neuman,  stated that  the                                                               
current process in defining the  16 different scenarios will have                                                               
a number of different scenarios  of compressor stations depending                                                               
upon the type  of natural gas liquids that are  going through the                                                               
pipeline and where the processing facility is located.                                                                          
                                                                                                                                
MR. SWENSON  further explained there are  four different pipeline                                                               
configurations.   One  configuration  is a  central gas  facility                                                               
(CGF) residue  gas only  from North  Slope gas  conditioning, and                                                               
Cook  Inlet  natural  gas  liquid  (NGL)  extraction.    In  this                                                               
scenario the only  gas being transported is the  methane gas from                                                               
the  slope  and all  of  the  impurities  are  taken out  at  the                                                               
conditioning  plant on  the North  Slope  and given  back to  the                                                               
producers.  The second configuration  is CGF residue gas only and                                                               
Cook  Inlet  gas  conditioning  and  NGL  extraction.    In  this                                                               
scenario the residue gas is taken  to a conditioning plant in the                                                               
Cook Inlet  region.  The  third configuration is CGF  residue gas                                                               
only  and  North  Slope  gas conditioning  and  North  Slope  NGL                                                               
extraction.  In  this scenario the natural gas  liquids are taken                                                               
out on the slope and the  processing facilities are on the slope.                                                               
The  fourth configuration  is  CGF residue  gas  spiked with  CGF                                                               
stabilizer with North Slope gas  conditioning and North Slope NGL                                                               
extraction.    In this  case  the  gas  is transported  with  the                                                               
impurities and spiked to make sure it does not corrode the pipe.                                                                
                                                                                                                                
MR.  SWENSON  added that  each  of  the  four scenarios  will  be                                                               
evaluated at four different throughputs:   from 250 million cubic                                                               
feet  per day  on up  to 1  billion cubic  feet per  day.   Those                                                               
sizes,  pressures,  and fluid  volumes  will  all have  different                                                               
configurations  of  the pipeline;  so  there  will be  compressor                                                               
stations  at  different  positions, different  locations  of  gas                                                               
processing facilities, and each one  of those has to be optimized                                                               
to the current conditions of the pipeline route.                                                                                
                                                                                                                                
CO-CHAIR  NEUMAN   observed  that  the  total   of  16  different                                                               
scenarios comes  from analyzing the  four different types  of gas                                                               
at four different volumes.                                                                                                      
                                                                                                                                
MR. SWENSON agreed.                                                                                                             
                                                                                                                                
7:57:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI noted  that Section 1 of  Version E would                                                               
establish the position  of in-state gasline project  manager.  He                                                               
understood that to be Mr. Swenson's current title.                                                                              
                                                                                                                                
MR. SWENSON responded correct.                                                                                                  
                                                                                                                                
REPRESENTATIVE  KAWASAKI observed  that  among  other things,  HB
369,  Version  E,  would establish  the  Joint  In-state  Gasline                                                               
Development Team  composed of the Department  of Transportation &                                                               
Public Facilities, the Alaska  Natural Gas Development Authority,                                                               
and the Alaska  Railroad.  He presumed Mr.  Swenson already works                                                               
with these  entities and  asked whether  Mr. Swenson  thinks this                                                               
provision is superfluous.                                                                                                       
                                                                                                                                
MR.  SWENSON replied  that it  is correct  his office  is working                                                               
with the different agencies although  he has not yet started with                                                               
the Alaska  Railroad given he  has only been  on the job  for two                                                               
months.  From  the standpoint of bonding, he  thinks working with                                                               
the Alaska  Railroad would be very  important.  In regard  to the                                                               
other agencies  identified by Version  E, he has worked  with the                                                               
Department  of Transportation  &  Public  Facilities to  identify                                                               
right-of-way issues, as  DOT&PF is the agency  of application for                                                               
the  right-of-way.   He  has  also  worked extensively  with  Mr.                                                               
Heinze of the Alaska Natural  Gas Development Authority to ensure                                                               
collaboration and no duplication of work.                                                                                       
                                                                                                                                
8:00:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI called  attention  to  the provision  in                                                               
Version  E   for  establishing   an  In-state   Gasline  Steering                                                               
Committee  composed of  numerous  agencies and  individuals.   He                                                               
said it seems  counter-intuitive to add all of  these entities as                                                               
far  as  streamlining and  efficiencies  go.   He  requested  Mr.                                                               
Swenson to speak to this.                                                                                                       
                                                                                                                                
MR. SWENSON answered he cannot  speak to a specific inefficiency,                                                               
but  noted that  there  is  a tremendous  breadth  and amount  of                                                               
interest for  in-state gas.   While  he is  not speaking  for the                                                               
sponsor, he  believes the  intent is to  ensure the  inclusion of                                                               
all  the stakeholders  in the  process.   Having  that number  of                                                               
people providing  input may  add to the  timeline, but  he cannot                                                               
specifically relate to that.                                                                                                    
                                                                                                                                
8:02:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  summarized the  provisions of Version  E and                                                               
offered  his  understanding  that the  in-state  gasline  project                                                               
manager  would  continue  for  one   year  after  the  July  2011                                                               
commercial  offering.    He  asked  whether  the  Joint  In-state                                                               
Gasline  Development  Team  and  the  In-state  Gasline  Steering                                                               
Committee would continue to be needed.                                                                                          
                                                                                                                                
MR.  SWENSON  responded  he  does not  know  whether  the  bill's                                                               
language provides  for the steering  committee to continue.   The                                                               
assumption  in  the fiscal  note  is  that after  the  commercial                                                               
offering has occurred  the steering committee would  need to meet                                                               
only  once a  year  to  keep everyone  informed  of the  progress                                                               
towards first gas.                                                                                                              
                                                                                                                                
8:04:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TUCK  understood   that  after   the  commercial                                                               
offering Mr.  Swenson is forecasting  the steering  committee may                                                               
be  needed  only  for  receiving information  and  updates.    He                                                               
presumed the development  team would be needed  until the project                                                               
is finalized.                                                                                                                   
                                                                                                                                
MR. SWENSON replied correct, there  are many decisions to be made                                                               
all the way  through the engineering and construction  path.  The                                                               
DOT&PF,  pipeline  coordinator,  and   the  funding  groups  will                                                               
certainly be  necessary throughout  that time  and that  would be                                                               
the case regardless of whether HB 369 passes.                                                                                   
                                                                                                                                
8:06:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  inquired whether the development  team would                                                               
be  privy  to all  of  the  private purchaser's  information  and                                                               
decision making.                                                                                                                
                                                                                                                                
MR. SWENSON  answered that similar  to the ongoing  AGIA process,                                                               
the  data  being  gathered through  the  engineering  process  is                                                               
confidential.   However, the state's  investment in  that process                                                               
will  require  that   the  project  team  have   access  to  that                                                               
confidential information  and continue to work  with the pipeline                                                               
builder to ensure the project moves forward as planned.                                                                         
                                                                                                                                
8:07:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK, in  regard  to the  earlier question  about                                                               
whether this bill  is necessary, recited the language  on page 4,                                                               
lines  7-12,  Version  E, regarding  cooperation  and  access  to                                                               
information.  He asked whether  Mr. Swenson already has access to                                                               
all of  the information  or whether this  language is  needed for                                                               
Mr. Swenson to move further.                                                                                                    
                                                                                                                                
MR. SWENSON  responded he believes  it is important  the language                                                               
at  least   addresses  the   confidential  information   that  is                                                               
developed by  the entity  that is gathering  it.   Currently, his                                                               
team  does   have  access  to   the  information,  such   as  the                                                               
confidential   aerial   photography,  orthoimagery,   and   Light                                                               
Detection  And  Ranging  (LIDAR)  that was  gathered  along  that                                                               
pipeline.   While  he cannot  address at  this time  whether this                                                               
language  is  specific  to  the language  that  is  necessary,  a                                                               
significant amount of confidential  information will be generated                                                               
and processed during the development phase of the pipeline.                                                                     
                                                                                                                                
REPRESENTATIVE TUCK  understood Mr. Swenson currently  has access                                                               
to that information.                                                                                                            
                                                                                                                                
MR. SWENSON replied correct.                                                                                                    
                                                                                                                                
8:10:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK, in regard to  "tidewater" on page 7, line 5,                                                               
Version E,  inquired whether there  is a definition  of tidewater                                                               
that indicates it does not mean the North Slope coast.                                                                          
                                                                                                                                
MR.  SWENSON answered  he  believes  the language  on  page 7  is                                                               
specifically addressing the  natural gas that is  produced on the                                                               
North  Slope north  of the  68th parallel,  which basically  runs                                                               
through the middle of the Brooks Range.                                                                                         
                                                                                                                                
REPRESENTATIVE TUCK  noted it is  not said on  page 7 that  it is                                                               
talking about the Cook Inlet distribution system.                                                                               
                                                                                                                                
MR.  SWENSON  replied  he believes  that  also  includes  Valdez.                                                               
Tidewater would just be bringing  North Slope gas to the southern                                                               
ice-free ports for the possibility of export from the state.                                                                    
                                                                                                                                
REPRESENTATIVE TUCK said  he wants to ensure  that tidewater does                                                               
not mean taking gas to the Beaufort Sea.                                                                                        
                                                                                                                                
MR. SWENSON allowed clarification may be necessary.                                                                             
                                                                                                                                
CO-CHAIR NEUMAN, given  the receding icecap, said  he believes an                                                               
LNG facility  on the  North Slope  or in  northwest Alaska  is an                                                               
option that has probably been discussed in board rooms.                                                                         
                                                                                                                                
REPRESENTATIVE TUCK said that is the  reason why he is asking for                                                               
the clarification.                                                                                                              
                                                                                                                                
8:12:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON,  in  regard  to  tidewater  and  Co-chair                                                               
Neuman's reference  on a  previous day to  bringing a  gasline to                                                               
the non-tidewater  Donlin Creek  Gold Mine, inquired  whether Mr.                                                               
Swenson's reading  of the bill would  include a spur line  to the                                                               
mine or would require clarification that this be allowed.                                                                       
                                                                                                                                
MR.  SWENSON  answered  he  assumes  the  reason  for  addressing                                                               
tidewater in  the bill as  written is  to bring the  pipeline all                                                               
the way  to tidewater or into  the Cook Inlet or  Valdez regions.                                                               
It does  not preclude  offtake points  anywhere along  the route,                                                               
such as  offtakes to  the Donlin Creek  Gold Mine,  the Fairbanks                                                               
region, or the Interior.                                                                                                        
                                                                                                                                
8:14:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON asked  whether  Mr.  Swenson believes  the                                                               
current Version  E language  would allow  for a  gas transmission                                                               
line to  be extended from  tidewater to  go from Anchor  Point to                                                               
Homer, a distance of approximately 14 miles.                                                                                    
                                                                                                                                
MR.  SWENSON, in  regard to  bringing the  gasline to  tidewater,                                                               
responded he believes  it is the intent of the  language to bring                                                               
it  into the  distribution system  that currently  exists in  the                                                               
Cook  Inlet.    Extension  of that  system  with  the  additional                                                               
resources  that   would  be  provided  by   this  pipeline  would                                                               
certainly be  conducive to extending  the current  ENSTAR system,                                                               
such as an  extension from Anchor Point into the  Homer region or                                                               
any of the developments that  could happen within the Cook Inlet,                                                               
as well as  along route from the North  Slope/Fairbanks area into                                                               
the  Cook Inlet  basin area  or  any part  of the  Railbelt.   He                                                               
believes the language would not preclude that type of activity.                                                                 
                                                                                                                                
8:15:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  reminded members  that  this  is Mr.  Swenson's                                                               
opinion, which may not be the same as the sponsor's intent.                                                                     
                                                                                                                                
REPRESENTATIVE SEATON  noted he has  been talking to  the sponsor                                                               
about  the extension  and offtake  issues, as  well as  a lateral                                                               
pipeline such as for Donlin Creek Gold  Mine.  He said he will be                                                               
offering some clarification language in this regard later on.                                                                   
                                                                                                                                
CO-CHAIR  NEUMAN  urged the  receipt  of  amendments as  soon  as                                                               
possible  so  members have  a  chance  to  review them  prior  to                                                               
committee meetings.                                                                                                             
                                                                                                                                
8:17:09 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON presumed  there  is some  information that  Mr.                                                               
Swenson does not have access to at this point.                                                                                  
                                                                                                                                
MR. SWENSON nodded yes.                                                                                                         
                                                                                                                                
CO-CHAIR  JOHNSON  stated  that  the advantage  of  bringing  the                                                               
Department  of Transportation  &  Public  Facilities, the  Alaska                                                               
Natural Gas Development Authority,  and others under one umbrella                                                               
would be to  have that information.   A confidentiality agreement                                                               
would  build   a  certain  level   of  confidence   within  those                                                               
organizations that  the information  would be  held confidential.                                                               
This would increase the project's  knowledge base and allow it to                                                               
proceed in a more expeditious manner.   He said he believes there                                                               
is information that Mr. Swenson's  team does not have, but needs,                                                               
and part of the  intent of this bill is to  bring all the parties                                                               
together   to    have   that   information    while   maintaining                                                               
confidentiality.                                                                                                                
                                                                                                                                
8:18:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  asked  whether  Mr. Swenson  is  aware  of  any                                                               
information gathered  by any agencies  of the state that  he does                                                               
not have.                                                                                                                       
                                                                                                                                
MR.  SWENSON  replied  one  of  the key  issues  is  the  current                                                               
engineering process  and use  of the  most modern  data available                                                               
along a  2,000-foot-wide corridor from  the Cook Inlet  Region to                                                               
the North Slope.  A significant  amount of data has been gathered                                                               
along  that corridor  from the  many different  times that  these                                                               
different pipeline options have been  looked at.  Additionally, a                                                               
significant amount  of data has  been gathered along  the current                                                               
railroad  and DOT&PF  right-of-ways and  all of  that information                                                               
would  certainly   be  helpful.     While  the   current  initial                                                               
engineering   work  has   the   most   modern  data,   additional                                                               
information  such as  subsurface information  would help  in that                                                               
process,  as  would  any  information  within  that  corridor  or                                                               
geotechnical work outside of that corridor.                                                                                     
                                                                                                                                
CO-CHAIR NEUMAN  requested Mr. Swenson  to provide a list  of the                                                               
information that would be helpful to him.                                                                                       
                                                                                                                                
MR. SWENSON agreed to do so.                                                                                                    
                                                                                                                                
8:21:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   JOHNSON    inquired   whether   the    Department   of                                                               
Transportation   &  Public   Facilities   has   been  asked   for                                                               
information  by the  in-state gas  project manager  or any  other                                                               
pipeline entity.                                                                                                                
                                                                                                                                
FRANK RICHARDS, Deputy Commissioner,  Office of the Commissioner,                                                               
Department  of  Transportation   &  Public  Facilities  (DOT&PF),                                                               
answered  that the  department worked  previously with  Mr. Harry                                                               
Noah  and  his  consultants  in  regard  to  DOT&PF  right-of-way                                                               
information.  The department has  a lot of right-of-way, but that                                                               
right-of-way is not defined as well  as it should; thus, there is                                                               
a lot  of information  that has  been asked  for that  DOT&PF has                                                               
been unable to give.  He  added the department needs to have more                                                               
detailed  right-of-way  analysis  in  terms  of  actual  property                                                               
boundaries that can be shared with the project team.                                                                            
                                                                                                                                
8:22:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  asked  whether the  department's  fiscal  note                                                               
accompanying  HB  369 would  allow  for  defining those  property                                                               
lines.  He further asked what else the fiscal note provides.                                                                    
                                                                                                                                
MR.  RICHARDS  responded  that the  fiscal  note  identifies  the                                                               
personnel  that  would  be  established   within  DOT&PF.    Such                                                               
personnel  would include  an Engineer  V  to act  as a  technical                                                               
expert  for   the  DOT&PF  commissioner  while   sitting  on  the                                                               
development  team.    An environmental  impact  analysis  manager                                                               
would  oversee  the work  done  within  DOT&PF's right-of-way  to                                                               
ensure compliance with state and  federal requirements within the                                                               
right-of-way.   An administrative  assistant would help  with the                                                               
day-to-day functions of  the engineer and analysis  manager.  The                                                               
fiscal note  includes $1  million in capital  cost to  define the                                                               
right-of-way where the  department does not have  the clear legal                                                               
descriptions  and, if  acquiring more  right-of-way is  needed by                                                               
the  in-state  project,  to  go out  and  do  those  right-of-way                                                               
assessments and pre-acquisition development efforts.                                                                            
                                                                                                                                
8:23:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  inquired  whether  there is  anything  in  the                                                               
federal agreements  that would prohibit the  state from advancing                                                               
a pipeline within the right-of-way.                                                                                             
                                                                                                                                
MR. RICHARDS replied the  department currently permits utilities,                                                               
such  as  pipelines,  electrical   lines,  and  telephone  cable,                                                               
through the  right-of-way and that  is allowed under  the federal                                                               
provisions  that  the department  operates  under.   The  federal                                                               
highway would  demand that  a utility, in  this case  a pipeline,                                                               
not be  permitted that  conflicts with  a future  road alignment.                                                               
That is why, in the  department's conversations with the in-state                                                               
pipeline  project   manager,  it   has  been  that   DOT&PF  gets                                                               
sufficient right-of-way  to ensure  a design that  prevents those                                                               
conflicts that would then result in future costs.                                                                               
                                                                                                                                
8:25:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON  asked  whether  there  are  any  places  where                                                               
pipeline runs  beside the road  that would provide a  history for                                                               
how to avoid right-of-way problems.                                                                                             
                                                                                                                                
MR.  RICHARDS answered  the department  will normally  permit the                                                               
utilities within  its existing right-of-way.   The department has                                                               
not purchased  right-of-way to allow  for a utility to  then come                                                               
into  that right-of-way  because  the department  has always  had                                                               
sufficient  right-of-way in  place.   In  those  cases where  the                                                               
department has  permitted a utility  within the  right-of-way and                                                               
later undertook  a design effort  that required moving  the road,                                                               
the department  was responsible for re-locating  that utility and                                                               
the project bore the cost.                                                                                                      
                                                                                                                                
8:26:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN noted  that quite a bit of  the proposed pipeline                                                               
route does not  follow right along a  road.  He said  he does not                                                               
think  the  department  would   have  to  purchase  rights-of-way                                                               
because so little of the  proposed route is along existing roads.                                                               
He surmised DOT&PF has looked at the proposed route.                                                                            
                                                                                                                                
MR. RICHARDS responded  the department has looked  at the concept                                                               
of the  route in terms  of places specifically identified  by Mr.                                                               
Noah,  such as  along the  Dalton  Highway where  there are  some                                                               
areas  in the  right-of-way and  some in  close proximity  to the                                                               
right-of-way.   He and Mr.  Noah discussed the concept  of DOT&PF                                                               
acquiring  that  right-of-way  from  the  Department  of  Natural                                                               
Resources  or  the  U.S.  Bureau  of  Land  Management  and  then                                                               
providing if for  the use of the pipeline.   In further response,                                                               
he said  the department has  an application for  the right-of-way                                                               
from the Department of Natural Resources.                                                                                       
                                                                                                                                
8:29:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN said  he believes  less  than 100  miles of  the                                                               
proposed pipeline route is along the highway.                                                                                   
                                                                                                                                
MR. RICHARDS replied he does not  know the actual mileage, or the                                                               
proximity,  or which  concept it  is  actually going  take.   The                                                               
geohazard analysis that Mr. Swenson  talked about could result in                                                               
the route  being moved.  In  the fiscal note, the  department put                                                               
together its best  indication of what it may  take depending upon                                                               
what final route selection was made by the engineering studies.                                                                 
                                                                                                                                
CO-CHAIR  NEUMAN  inquired  whether   the  fiscal  note  includes                                                               
funding for  purchasing property  from the Department  of Natural                                                               
Resources.                                                                                                                      
                                                                                                                                
MR. RICHARDS answered  no, the capital dollars  identified in the                                                               
fiscal note are for private or  federal lands that may need to be                                                               
acquired and  the funding  is for hiring  consultants to  help in                                                               
that selection.                                                                                                                 
                                                                                                                                
8:30:41 PM                                                                                                                    
                                                                                                                                
MR. RICHARDS,  in response to Representative  Kawasaki, said that                                                               
currently DOT&PF  is the applicant  for the state lands  from the                                                               
Department of  Natural Resources and  for the federal  lands from                                                               
the  U.S. Bureau  of Land  Management.   In further  response, he                                                               
said DOT&PF has the power to  take land by eminent domain, but he                                                               
is unsure  whether that would  be allowed or prohibited  for this                                                               
specific purpose.   While the department  has statutory authority                                                               
to construct  pipelines, he would  have to seek legal  opinion on                                                               
the issue of eminent domain in this regard.                                                                                     
                                                                                                                                
REPRESENTATIVE KAWASAKI requested  he be provided with  a copy of                                                               
this legal opinion.                                                                                                             
                                                                                                                                
8:32:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  inquired where  DOT&PF is  at in  the permitting                                                               
process.                                                                                                                        
                                                                                                                                
MR. RICHARDS replied  the permits he was referring to  are in the                                                               
right-of-way  permit applications  to the  Department of  Natural                                                               
Resources for state lands that would  be needed and to the Bureau                                                               
of Land  Management for federal  lands.  Those  applications were                                                               
completed in late November/early  December [2009] timeframe.  The                                                               
application process  will likely  take six  to twelve  months; he                                                               
offered to  get back to  members in  regard to exactly  how long.                                                               
In further response, he said the  permits are for the crossing of                                                               
federal  lands  and  state  lands where  DOT&PF  would  not  have                                                               
existing lands that can accommodate the project.                                                                                
                                                                                                                                
CO-CHAIR  NEUMAN  surmised the  permits  do  not include  private                                                               
lands.                                                                                                                          
                                                                                                                                
MR. RICHARDS answered correct.                                                                                                  
                                                                                                                                
CO-CHAIR NEUMAN  presumed DOT&PF  has eminent domain  ability for                                                               
the taking of private lands.                                                                                                    
                                                                                                                                
MR. RICHARDS reiterated  he would have to defer  to legal counsel                                                               
to tell him whether DOT&PF has that power.                                                                                      
                                                                                                                                
8:35:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI asked how much  money DOT&PF has spent in                                                               
the  last several  years  on the  in-state  natural gas  pipeline                                                               
project development right-of-way.                                                                                               
                                                                                                                                
MR.  RICHARDS responded  he  is  able to  address  only the  most                                                               
recent efforts that were done with  Mr. Noah and now Mr. Swenson.                                                               
After passage of the legislation that  put Mr. Noah in place, Mr.                                                               
Noah came  to DOT&PF  asking for assistance  and support  in this                                                               
regard.   Since  passage of  AGIA, the  department liaison  - the                                                               
development director for  the natural gas pipeline -  has been in                                                               
place.   The liaison worked  with Mr. Noah throughout  the summer                                                               
and fall on  those applications.  No extra  dollars were expended                                                               
because  this position  was already  a permitted  position within                                                               
DOT&PF.  In further response,  he said this position is currently                                                               
staffed by  John Reeves of  Fairbanks, who works on  in-state and                                                               
large diameter gas pipeline issues related to DOT&PF.                                                                           
                                                                                                                                
8:36:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  noted that  he earlier had  an amendment                                                               
dealing  with  reimbursement for  project  cost  incurred by  the                                                               
state.   He inquired whether  Mr. Richards anticipates  the costs                                                               
incurred for that work would be covered by this amendment.                                                                      
                                                                                                                                
MR.  RICHARDS  replied  he does  not  believe  DOT&PF's  internal                                                               
costs, specifically Mr. Reeves' time,  would be charged out.  The                                                               
department has  not had  a large operating  budget to  define the                                                               
engineering analysis  that is being  done by Mr.  Swenson's team.                                                               
As a landowner and as  an engineering organization the department                                                               
is able to provide the support that  it can, but it is mostly in-                                                               
kind support.                                                                                                                   
                                                                                                                                
8:37:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK asked  whether Mr. Reeves was  also doing the                                                               
same  type  of  work  with the  Alaska  Natural  Gas  Development                                                               
Authority.                                                                                                                      
                                                                                                                                
MR. RICHARDS answered he believes Mr.  Reeves was a member of the                                                               
Alaska  Gasline  Port  Authority   prior  to  coming  to  DOT&PF.                                                               
Subsequent  to  coming to  DOT&PF,  Mr.  Reeves has  worked  with                                                               
ANGDA, but this  work has been minimal.  In  further response, he                                                               
said DOT&PF  has had  correspondence with ANGDA,  but it  has not                                                               
been an extensive effort.                                                                                                       
                                                                                                                                
REPRESENTATIVE TUCK  surmised Mr. Reeve's position  was primarily                                                               
for right-of-way access  no matter the entity asking  for it, and                                                               
that Mr. Reeves had worked with Mr. Noah and ANGDA.                                                                             
                                                                                                                                
MR. RICHARDS  explained Mr.  Reeves was  hired to  initially work                                                               
with  the   AGIA  applicant   to  look   at  the   logistics  and                                                               
infrastructure needs on the highways,  bridges, and airports that                                                               
DOT&PF  owns  and  operates  to   ensure  that  the  department's                                                               
infrastructure  could facilitate,  rather  than  hinder, a  large                                                               
diameter pipeline construction project.                                                                                         
                                                                                                                                
8:40:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN inquired  whether Mr. Reeves still  works for the                                                               
department.                                                                                                                     
                                                                                                                                
MR. RICHARDS responded yes.                                                                                                     
                                                                                                                                
CO-CHAIR NEUMAN  asked whether  there was a  point in  time where                                                               
Mr. Reeves  was the  main person  in charge  of applying  for the                                                               
permits for DOT&PF.                                                                                                             
                                                                                                                                
MR. RICHARDS replied yes.                                                                                                       
                                                                                                                                
CO-CHAIR NEUMAN  inquired whether  Mr. Reeves  is still  the main                                                               
person in charge of applying for permits for DOT&PF.                                                                            
                                                                                                                                
MR. RICHARDS said  Mr. Reeves is currently out of  state, so most                                                               
of the efforts  for the in-state gasline are  presently coming to                                                               
him through  Mr. Swenson.   In response to further  questions, he                                                               
said Mr.  Reeves is  on vacation and  doing some  part-time work,                                                               
about  five days  a month,  for DOT&PF.   He  explained that  the                                                               
permit was  assembled by Mr.  Noah's team of consultants  and Mr.                                                               
Reeves, in consort with Mr.  Noah and Mr. Noah's consultants, was                                                               
the signatory on that permit.                                                                                                   
                                                                                                                                
8:41:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  related  that  Mr.  Reeves  gave  testimony  on                                                               
December 15, [2009],  that his work on the permits  at DOT&PF was                                                               
to  ensure that  the in-state  gas  pipeline was  expedited.   He                                                               
asked whether he  is now hearing that Mr. Reeves  is not the lead                                                               
person ensuring that the permits are done.                                                                                      
                                                                                                                                
MR.  RICHARDS answered  yes, that  is  Mr. Reeves'  job, and  the                                                               
permits  have been  submitted;  so the  work  effort required  by                                                               
DOT&PF  is waiting  for  the  permit process  to  go through  its                                                               
internal workings at the Department  of Natural Resources and the                                                               
U.S. Bureau  of Land  Management.  In  further response,  he said                                                               
Mr. Reeves has been on leave without pay since January 2010.                                                                    
                                                                                                                                
8:44:10 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   JOHNSON    inquired   whether   the    Department   of                                                               
Transportation  & Public  Facilities is  ready  to go  if HB  369                                                               
passes.                                                                                                                         
                                                                                                                                
MR. RICHARDS responded that DOT&PF  is game; the department likes                                                               
to  construct roads,  airports, and  infrastructure, and  it sees                                                               
the  benefit  of  providing  energy  to  Alaskans.    In  further                                                               
response, he  said the  department does  not have a  Plan A  or a                                                               
Plan B, it is just ready to go.                                                                                                 
                                                                                                                                
CO-CHAIR NEUMAN  asked whether Mr.  Richards would place  the in-                                                               
state gas pipeline as DOT&PF's highest priority.                                                                                
                                                                                                                                
MR.  RICHARDS  replied  it  would   be  the  priority  for  those                                                               
individuals  working  on the  project,  provided  DOT&PF has  the                                                               
assets to  do the  work it is  asked to do.   The  department has                                                               
numerous  fronts   that  it  works  on   -  highways,  aviations,                                                               
buildings, ports,  harbors, and the  marine highway system  - and                                                               
all  are  high priority  to  the  citizens  of Alaska,  and  this                                                               
project would be high priority as well.                                                                                         
                                                                                                                                
CO-CHAIR NEUMAN  said he is  upset that  the person who  had this                                                               
project as  his number one priority  has not been working  at the                                                               
department since January.                                                                                                       
                                                                                                                                
MR. RICHARDS answered that Mr. Reeves  is scheduled to be back at                                                               
DOT&PF at the  end of this month  or next month, and  this is his                                                               
priority.                                                                                                                       
                                                                                                                                
8:47:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK reviewed  the amount  of travel  and meeting                                                               
times budgeted in the fiscal note  for the Division of Oil & Gas.                                                               
He inquired whether DOT&PF's budget  will allow for its personnel                                                               
to meet this schedule.                                                                                                          
                                                                                                                                
MR.  RICHARDS responded  the department  did  include travel  for                                                               
these  meetings in  its  fiscal  note for  HB  369.   In  further                                                               
response,  he said  he does  not  recall how  many meetings  were                                                               
anticipated.                                                                                                                    
                                                                                                                                
8:50:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI cited  the various  state entities  that                                                               
would be  involved in  the project  under HB  369 and  noted that                                                               
these  entities are  already charged  with  certain duties  under                                                               
current  statute  for  assisting  with getting  an  in-state  gas                                                               
pipeline  built.     He  asked  whether   Mr.  Richards  believes                                                               
communication  is   currently  lacking  so  that   this  bill  is                                                               
necessary to make a gasline happen.                                                                                             
                                                                                                                                
MR. RICHARDS replied  his personal analysis is  the bill provides                                                               
an emphasis at  the highest level of government  to drive forward                                                               
this project and  show its importance.  The  department does work                                                               
with  the other  entities  named within  the bill  to  be on  the                                                               
development team.   The commissioner of DOT&PF sits  on the board                                                               
of  the Alaska  Railroad  and Alaska  Industrial Development  and                                                               
Export  Authority  (AIDEA); therefore,  that  cross-communication                                                               
already  exists and  the department  does work  jointly with  its                                                               
sister agencies to push forward priority projects.                                                                              
                                                                                                                                
8:52:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI inquired  whether Mr.  Richards believes                                                               
the addition  of a steering  committee with over 20  members will                                                               
help or hinder the process.                                                                                                     
                                                                                                                                
MR.  RICHARDS  answered  that  DOT&PF  has  an  extensive  public                                                               
process that it  lives with daily for large  or complex projects.                                                               
The department sets  up meetings with the  individuals that would                                                               
be most impacted  by that project to hear  their input, concerns,                                                               
and recommendations.  That process  has proved very beneficial in                                                               
meeting  the needs  of the  public and  stakeholders.   Thus, the                                                               
steering committee  can be  of much benefit  as long  as everyone                                                               
knows the urgency and everything is done in a timely fashion.                                                                   
                                                                                                                                
8:54:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI commented  he thinks  both DOT&PF's  and                                                               
DNR's processes are cumbersome; therefore  he does not see HB 369                                                               
as moving the  state in the direction of getting  a gasline.  The                                                               
development  team and  avoidance  of duplication  of studies  and                                                               
plans  are positives,  but it  seems this  could be  done without                                                               
writing a new section of law.                                                                                                   
                                                                                                                                
CO-CHAIR NEUMAN  responded he  is counting  on the  experience of                                                               
the sponsor in this regard.                                                                                                     
                                                                                                                                
8:56:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON noted that while  the bill has the 2011 and                                                               
2015 timelines,  he does not see  a timeline for an  open season.                                                               
He asked  where an  open season comes  into this  timeline, given                                                               
that open seasons are a critical factor in timing and planning                                                                  
                                                                                                                                
REPRESENTATIVE MIKE  CHENAULT, Alaska State  Legislature, sponsor                                                               
of HB  369, replied the bill  does not specify dates  for an open                                                               
season.  He  said he does not believe the  AGIA process specifies                                                               
a specific date  either.  While he does not  have a specific date                                                               
for an open season, he feels HB 369  is the best way to get to an                                                               
open season for in-state gas.                                                                                                   
                                                                                                                                
8:58:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NEUMAN  cited the  language  on  page 3,  lines  13-14,                                                               
Version E, that states "take  actions necessary to enable natural                                                               
gas to  flow down the pipeline  by 2015."  He  said those actions                                                               
will be  determined by  the development team  as it  goes through                                                               
the process.                                                                                                                    
                                                                                                                                
MR. SWENSON  explained that an  open season process  is regulated                                                               
by  the Federal  Energy  Regulatory Commission  (FERC)  - if  the                                                               
pipeline is  a FERC-regulated pipeline.   However, it  is assumed                                                               
that the in-state gas pipeline will  not be regulated by FERC and                                                               
will  instead  be   coordinated  by  the  U.S.   Bureau  of  Land                                                               
Management.   For  a  non-FERC  pipeline, there  is  not what  is                                                               
termed an  open season.   Rather, after the  commercial offering,                                                               
the  entity building  the pipeline  will go  to other  companies,                                                               
including  producers and  consumers, to  marry that  relationship                                                               
between the producer and the consumer.                                                                                          
                                                                                                                                
9:00:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  inquired  whether an  in-state,  non-FERC                                                               
process requires  open access bidding.   In response  to Co-Chair                                                               
Neuman, he said  he understands the FERC process but  not the in-                                                               
state non-FERC process.  Therefore, he is asking whether the in-                                                                
state  process is  open to  all  comers like  it is  for an  open                                                               
season under the FERC process.                                                                                                  
                                                                                                                                
MR. SWENSON  explained that current  pipelines in the  Cook Inlet                                                               
region carrying gas between different  units and to consumers are                                                               
common carriers  and are regulated  by the  Regulatory Commission                                                               
of Alaska  (RCA).   A single entity  building a  pipeline between                                                               
its  facility  and  its  reserves  does not  have  to  be  common                                                               
carrier,  but an  in-state gas  pipeline would  be RCA  regulated                                                               
similar to what is seen in  the Cook Inlet.  In further response,                                                               
he said  he would like  to defer this  question until he  can get                                                               
legal counsel to  make sure he is answering correctly,  but it is                                                               
his  understanding that  this  in-state gas  project  would be  a                                                               
common carrier and regulated through the RCA.                                                                                   
                                                                                                                                
9:03:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NEUMAN  requested members  to provide any  amendments to                                                               
other members at least 24 hours before the next meeting.                                                                        
                                                                                                                                
REPRESENTATIVE TUCK  advised he may  look into an  amendment that                                                               
defines tidewater.                                                                                                              
                                                                                                                                
CO-CHAIR JOHNSON urged  that amendments be prepared  for the next                                                               
meeting so the bill can be acted upon at that time.                                                                             
                                                                                                                                
[HB 369 was held over.]                                                                                                         
                                                                                                                                

Document Name Date/Time Subjects