Legislature(2013 - 2014)BARNES 124

04/09/2014 08:00 AM RESOURCES


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08:07:03 AM Start
08:07:26 AM SB138
10:09:23 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed from 4/8/14 --
+= SB 138 GAS PIPELINE; AGDC; OIL & GAS PROD. TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         SB 138-GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                     
                                                                                                                                
8:07:26 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  announced that the  only order of business  is CS                                                               
FOR  SENATE  BILL  NO.  138(FIN)  am, "An  Act  relating  to  the                                                               
purposes, powers,  and duties of  the Alaska  Gasline Development                                                               
Corporation;  relating to  an in-state  natural gas  pipeline, an                                                               
Alaska  liquefied  natural  gas project,  and  associated  funds;                                                               
requiring state  agencies and other entities  to expedite reviews                                                               
and  actions  related  to natural  gas  pipelines  and  projects;                                                               
relating to  the authorities  and duties  of the  commissioner of                                                               
natural resources relating to a  North Slope natural gas project,                                                               
oil and  gas and gas only  leases, and royalty gas  and other gas                                                               
received by the  state including gas received as  payment for the                                                               
production  tax on  gas;  relating  to the  tax  on  oil and  gas                                                               
production, on  oil production, and  on gas  production; relating                                                               
to the duties of the commissioner  of revenue relating to a North                                                               
Slope natural  gas project and  gas received as payment  for tax;                                                               
relating to confidential information  and public record status of                                                               
information provided  to or in  the custody of the  Department of                                                               
Natural  Resources and  the Department  of  Revenue; relating  to                                                               
apportionment factors of the Alaska  Net Income Tax Act; amending                                                               
the definition  of gross value  at the 'point of  production' for                                                               
gas for  purposes of the  oil and gas production  tax; clarifying                                                               
that the  exploration incentive credit,  the oil or  gas producer                                                               
education credit, and  the film production tax credit  may not be                                                               
taken against  the gas  production tax paid  in gas;  relating to                                                               
the  oil  or  gas  producer   education  credit;  requesting  the                                                               
governor to  establish an  interim advisory  board to  advise the                                                               
governor on  municipal involvement in  a North Slope  natural gas                                                               
project;  relating to  the development  of a  plan by  the Alaska                                                               
Energy  Authority   for  developing  infrastructure   to  deliver                                                               
affordable  energy to  areas  of  the state  that  will not  have                                                               
direct  access  to a  North  Slope  natural  gas pipeline  and  a                                                               
recommendation  of a  funding  source  for energy  infrastructure                                                               
development;  establishing  the  Alaska affordable  energy  fund;                                                               
requiring  the commissioner  of  revenue to  develop  a plan  and                                                               
suggest  legislation for  municipalities, regional  corporations,                                                               
and residents  of the state  to acquire ownership interests  in a                                                               
North  Slope  natural  gas pipeline  project;  making  conforming                                                               
amendments; and providing for an effective date."                                                                               
                                                                                                                                
8:07:32 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 39,  labeled 28-                                                               
GS2806\I.A.7, Bullock, 4/1/14, which read:                                                                                      
                                                                                                                                
     Page 15, following line 30:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 16. AS 38.05 is amended by adding a new                                                                     
     section to read:                                                                                                           
          Sec. 38.05.023. Timing of state investment in a                                                                     
     North  Slope  natural  gas  project.  An  agreement  or                                                                  
     contract negotiated under  AS 38.05.020(b)(11) or other                                                                    
     agreement or  contract in  which the  state is  a party                                                                    
     and that is  associated with a North  Slope natural gas                                                                    
     project may not  require an investment by  the state in                                                                    
     the project  until a final investment  decision is made                                                                    
     to construct the project."                                                                                                 
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE SEATON  explained Amendment  39 would  direct that                                                               
the timing of  the state's investment [in the  project] would not                                                               
be  until  the  project  was sanctioned  or  a  final  investment                                                               
decision (FID)  to construct the  project was made.   He reminded                                                               
the committee  that consultants representing the  legislature had                                                               
previously  testified  on the  amendment  but  they were  not  in                                                               
agreement.     Testimony   was   also   heard  from   consultants                                                               
representing  the administration.    He  requested the  committee                                                               
hear the administration's opinion on Amendment 39 at this time.                                                                 
                                                                                                                                
8:08:43 AM                                                                                                                    
                                                                                                                                
MICHAEL   PAWLOWSKI,   Deputy   Commissioner,   Office   of   the                                                               
Commissioner,  Department  of  Revenue, said  the  administration                                                               
does not support Amendment 39  for several reasons.  Firstly, the                                                               
basic premise  of the  Heads of Agreement  (HOA) was  centered on                                                               
the percentage  of state participation,  the process to  move the                                                               
project  forward and  - most  importantly -  that the  state will                                                               
participate.   He expressed the administration's  belief that the                                                               
material benefits  for state participation  early in  the project                                                               
are interwoven  through the  HOA in terms  of the  development of                                                               
the commercial  agreements regarding  expansion policies  and the                                                               
access for  third parties to gas.   Also, ensuring the  state has                                                               
access  to  data   and  a  full  understanding   of  the  project                                                               
indirectly  through TransCanada  (TC),  or  directly through  the                                                               
Alaska  Gasline Development  Corporation (AGDC),  is critical  to                                                               
the  sizing and  the design  of  the components  of the  project.                                                               
Lastly, the other  parties to the HOA see  state participation as                                                               
a  key enabler  for  the project  that  demonstrates the  state's                                                               
commitment, and sends  a message to the  natural gas marketplace.                                                               
He  stressed the  importance  of the  market's  reception to  the                                                               
project  during the  Pre-Front-End Engineering  and Design  (Pre-                                                               
FEED)  stage.    Mr.   Pawlowski  restated  the  administration's                                                               
opposition to Amendment 39.                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON recalled the  concern stated by Roger Marks                                                               
[contract  petroleum economist  consultant to  Legislative Budget                                                               
and  Audit Committee]  about circumstances  that would  result if                                                               
the  project does  not  go forward  and is  not  sanctioned.   He                                                               
concluded  that  the  subject has  been  thoroughly  vetted,  and                                                               
withdrew Amendment 39.                                                                                                          
                                                                                                                                
8:12:13 AM                                                                                                                  
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Amendment 40, labeled 28-                                                                  
GS2806\I.A.99, Bullock, 4/6/14, which read:                                                                                     
                                                                                                                                
     Page 15, following line 30:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 16. AS 38.05 is amended by adding a new                                                                     
     section to read:                                                                                                           
          Sec. 38.05.023. State access to data developed                                                                      
     under contract.  An agreement  or contract in which the                                                                  
     state  or an  agent of  the state  is a  party that  is                                                                    
     negotiated  under  AS 38.05.020(b)(11) must  include  a                                                                    
     requirement that,  if the commissioner  determines that                                                                    
     the  North  Slope natural  gas  project  is not  making                                                                    
     adequate progress  toward a final  investment decision,                                                                    
     the  state shall  have access  to data  developed under                                                                    
     the  agreement  or  contract in  which  the  state  has                                                                    
     participated financially.   Access by the  state to the                                                                    
     data  may not  be on  terms that  are more  restrictive                                                                    
     than the  terms that are  applicable for access  by any                                                                    
     other party in the North Slope natural gas project."                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON explained  Amendment  40  seeks to  ensure                                                               
that the state's investment leads to  the use of data [that would                                                               
have  been  developed  under contract]  should  the  project  not                                                               
achieve sanction.  He said  he wants the [forthcoming] agreements                                                               
to make clear that after the  state invests $600 million it gains                                                               
full  use of  the  data  pertaining to  the  project, should  the                                                               
project not  go forward.  Representative  Seaton related previous                                                               
testimony by  the legislature's consultants that  projects "don't                                                               
get a  vote of not going  forward or not sanctioning"  but can be                                                               
delayed for  years.   Therefore, Amendment 40  directs that  if a                                                               
project  stops making  adequate progress  to FID  after achieving                                                               
the  FEED  stage,  the  commissioner  of  natural  resources  can                                                               
determine that the project has stalled  and the state can use the                                                               
data.  He assured the committee  the amendment does not take away                                                               
data from  other parties and referred  to page 1, lines  10-12 of                                                               
Amendment 40 which read:                                                                                                        
                                                                                                                                
     Access by  the state to  the data  may not be  on terms                                                                    
     that  are  more restrictive  than  the  terms that  are                                                                    
     applicable for access  by any other party  in the North                                                                    
     Slope natural gas project.                                                                                                 
                                                                                                                                
8:15:33 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  then  moved   to  adopt  Amendment  1  to                                                               
Amendment 40 as follows:                                                                                                        
                                                                                                                                
     Page 1, line 9, after "has":                                                                                               
          Insert "directly"                                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON explained Amendment  1 to Amendment 40 will                                                               
make sure  "that we're  not talking  about our  relationship with                                                               
TransCanada."  He clarified that  Amendment 40 is applicable when                                                               
the  state has  put in  its 20-25  percent of  the costs  in [the                                                               
project], and  the state  would then  have the  full use  of that                                                               
data for another project if this one stalls.                                                                                    
                                                                                                                                
8:17:19 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  objected to Amendment 1  to Amendment 40.                                                               
He  requested  clarification  on  whether the  amendment  to  the                                                               
amendment specifically  excludes information  that the  state may                                                               
have paid  for through  TransCanada.  He  surmised the  state may                                                               
want access  to that information  as well  as what the  state has                                                               
"directly" paid for.   He expressed his concern that  there are a                                                               
lot of  things the  state might  not have  access to  because the                                                               
state wrote  the check to a  second party who then  got the data;                                                               
although the state paid for it, it was not paid "directly."                                                                     
                                                                                                                                
MR.  PAWLOWSKI said  the principle  of access  to data  is a  key                                                               
interest of the state; the  state's relationship with TransCanada                                                               
on  a  prospective basis  is  that  TransCanada would  be  making                                                               
expenditures  directly, while  the  state,  through Pre-FEED  and                                                               
with 90-day notice,  has the right to  terminate the relationship                                                               
with  TransCanada.    In  that   event,  the  state  would  repay                                                               
development   costs  and   allowance   for   funds  used   during                                                               
construction  (AFUDC) if  the state  terminated, and  TransCanada                                                               
would release the data to the state  "as is, where is."  Thus the                                                               
intent of  Amendment 1 to Amendment  40 is to recognize  that the                                                               
aforementioned  exchange of  information  has  already been  pre-                                                               
agreed to and specified in  the Memorandum of Understanding (MOU)                                                               
[with TransCanada].                                                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON referred  to the "as is,  where is" clause                                                               
and  expressed additional  concern about  how the  data would  be                                                               
acquired.  He  requested clarification on how  the two agreements                                                               
with  TransCanada  compare related  to  "what  data is  available                                                               
"under  the  current agreement  that  we're  replacing with  this                                                               
agreement ...."                                                                                                                 
                                                                                                                                
8:20:57 AM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI  directed attention to the  Letter of Clarification                                                               
to Memorandum  of Understanding (Letter of  Clarification) [dated                                                               
4/4/14] released to  the committee by the  parties that describes                                                               
the process  by which the previous  relationship with TransCanada                                                               
under the  Alaska Gasline  Inducement Act  (AGIA) [passed  by the                                                               
25th  Alaska   State  Legislature]  would  be   terminated  in  a                                                               
sequential fashion.   The terms of  the MOU are built  around the                                                               
contribution of the previous data "that  the state has paid for a                                                               
portion of, a  very substantial portion of, but  not the entirety                                                               
of."   The MOU covers  the use of that  data and the  purchase of                                                               
the data with  the payment of development costs  should the state                                                               
exercise its termination rights.  On  the matter of "as is, where                                                               
is," he pointed  out the importance of [Amendment  13, adopted on                                                               
4/5/14,], which  put AGDC in  a prime consultative role  with DNR                                                               
in  the  development  of  the  agreement.   He  explained  it  is                                                               
important  because AGDC  would be  using the  remanded data,  and                                                               
having AGDC work  directly with DNR means to have  the utmost use                                                               
of   the  data   after  it   is  transferred.     Mr.   Pawlowski                                                               
characterized [Amendment  13] as  one of the  key factors  to the                                                               
state's success in this process.                                                                                                
                                                                                                                                
8:22:34 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON said he was  "not totally comfortable with                                                               
the explanation" and opined the data  is all the state has in the                                                               
project even though a significant  amount of money has been paid.                                                               
He said  he wants full  access to  everything the state  has paid                                                               
for, or  invested in, or  the state's partners have  invested in.                                                               
He expressed his  concern that he does not know  if "this gets us                                                               
there"  and  whether  "'directly'  changes it  that  much."    He                                                               
cautioned  that not  having the  data may  lead to  a competitive                                                               
disadvantage  for  partners in  another  project.   There  remain                                                               
issues about the  data but "if we're paying for  it we should own                                                               
it."  He withdrew his objection to Amendment 1 to Amendment 40.                                                                 
                                                                                                                                
8:24:56 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON objected,  and requested  Mr. Pawlowski                                                               
to further  explain the administration's stance  on the amendment                                                               
to the amendment.                                                                                                               
                                                                                                                                
MR. PAWLOWSKI  explained that  the way  the amendment  is crafted                                                               
causes  broad   concern  amongst  the  parties.     Specifically,                                                               
"directly"  is relevant  to the  [Alaska  LNG Midstream  Services                                                               
Term Sheet] agreed to with  TransCanada in the MOU, because post-                                                               
FEED,  the  commissioner  of  DNR   could  exercise  a  different                                                               
termination right than the ones  that have already been agreed to                                                               
in  the MOU.   He  restated that  for the  next 18-24  months the                                                               
state can terminate its relationship with TransCanada with 90-                                                                  
day  notice.   At that  point,  the state  would pay  development                                                               
costs  and  AFUDC.    His  concern  with  Amendment  40,  without                                                               
Amendment 1,  is that the  amendment would "clearly upend  a term                                                               
in  the MOU  relating to  termination events  after, during,  the                                                               
FEED stage."                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.   WILSON  suggested   the  use  of   the  word                                                               
"indirectly" instead of "directly."                                                                                             
                                                                                                                                
8:27:01 AM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI expressed his understanding  that in the context of                                                               
the  amendment  "directly"  recognizes  that  the  state  is  not                                                               
directly paying for its share  of the midstream, unless the state                                                               
exercises  a   termination  event  with  TransCanada.     In  the                                                               
midstream, TransCanada is "writing the  checks ... and paying the                                                               
cash" and  Amendment 40  would upend  the relationship  where, if                                                               
the state terminates,  a true-up occurs and  the parties exchange                                                               
information.                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON inquired  whether, no matter  what, the                                                               
state will get that information  with Amendment 1 to Amendment 40                                                               
and the word "directly."                                                                                                        
                                                                                                                                
MR. PAWLOWSKI  affirmed that  the exchange  of information  is in                                                               
the  Term  Sheet  of  the  MOU,  and  when  the  state  pays  the                                                               
development  costs,  it  gets  the  information.    Because  this                                                               
agreement is in the commercial  agreements, he reiterated that it                                                               
is very  important to  the state  to have  AGDC working  with the                                                               
agencies  since AGDC  will  be using  the data  and  needs to  be                                                               
engaged in the development process.                                                                                             
                                                                                                                                
8:29:18 AM                                                                                                                    
                                                                                                                                
JOE DUBLER,  Vice President and  Chief Financial  Officer, Alaska                                                               
Gasline   Development   Corporation,  Department   of   Commerce,                                                               
Community &  Economic Development,  acknowledged that  the access                                                               
to data has been a difficult  issue for the state and TransCanada                                                               
under  AGIA and  the Alaska  Liquefied Natural  Gas Project  (the                                                               
Alaska  LNG Project).   He  stressed that  the data  needs to  be                                                               
available to AGDC  in the event of the failure  of the Alaska LNG                                                               
Project so  the state can  use the data that  it has paid  for in                                                               
the Alaska Stand Alone Pipeline  (ASAP) project.  Currently, AGDC                                                               
is  not  a   participant  "in  the  midstream"   and  would  only                                                               
participate in the  event of exercising the 40  percent option in                                                               
the  MOU  with TransCanada.    If  the  project fails  within  18                                                               
months, the  state will not  have spent  money on the  data, thus                                                               
will  not  have access  to  the  data.    However, if  the  state                                                               
exercises its  option at  the end  of Pre-FEED,  the state  has a                                                               
right to the data.  The term "as  is, where is" does not mean the                                                               
data is "locked  up" but that TransCanada would  provide the data                                                               
in its existing form.                                                                                                           
                                                                                                                                
REPRESENTATIVE  HAWKER turned  the  debate to  Amendment 40,  and                                                               
asked whether  the state  has access to  the data  if TransCanada                                                               
withdraws.    The  specifics  of  the  amendment  are  not  about                                                               
TransCanada  "going  away" but  are  about  "not making  adequate                                                               
progress."  He directed attention to  page 9 [of Exhibit C of the                                                               
MOU, Key Item 9, Termination  Event Alaska LNG Midstream Services                                                               
Term Sheet,] paraphrasing the item as follows:                                                                                  
                                                                                                                                
     Upon  a   termination  event  and  payment   for  those                                                                    
     development costs,  then the  Transporter, TransCanada,                                                                    
     shall assign  all of its  interest in the  Pre-FEED JVA                                                                    
     [joint  venture  agreement]   or  the  FEED  Agreement,                                                                    
     including all of  its equity stake to  the shipper, the                                                                    
     State of Alaska                                                                                                            
                                                                                                                                
REPRESENTATIVE HAWKER  asked for verification that  the preceding                                                               
statement means  the state gets  all the data upon  a termination                                                               
event.   He  began a  review of  several related  points.   It is                                                               
clear there is a list of  termination events that would result in                                                               
the  state  getting the  data  without  the amendment,  including                                                               
giving 90-day  notice before FEED.   If the termination  event is                                                               
prior  to the  negotiations  of the  firm transportation  service                                                               
agreements  (FTSA), the  five-year "tag"  goes away  too.   After                                                               
FEED, if partners withdraw or if  the state is unable to sell gas                                                               
on acceptable terms, the state gets  the data.  At FID, the state                                                               
or TransCanada can walk away from  the project for any reason and                                                               
the state  gets the data.   Representative Hawker  listed further                                                               
termination  events specified  in the  MOU.   He  then asked  for                                                               
concurrence  with  his  opinion  that  the  state  is  adequately                                                               
protected under the MOU as  previously cited, but warned that the                                                               
amendment  modifies the  MOU  by adding  the  descriptor of  "not                                                               
making adequate  progress," and further specifies  that the state                                                               
gets  "access," when  the termination  event clause  directs that                                                               
the state  gets the  data. Finally, Amendment  1 to  Amendment 40                                                               
adds the  modifier of "directly"  with the  implications thereof.                                                               
He  said he  does not  agree with  the amendment  in general  and                                                               
addition of  the word "directly"  boxes the state  into something                                                               
that he does not want to go to.                                                                                                 
                                                                                                                                
8:37:23 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  observed that  the  four  parties to  the                                                               
agreement are the  three producers and the state.   The state may                                                               
subdivide  its  interest  with  TransCanada,  and  the  amendment                                                               
addresses the  state's access  to the data  with the  other three                                                               
parties.  The  administration suggested the addition  of the word                                                               
"directly" to avoid the appearance of  an "end run around the MOU                                                               
and  the  termination  events."    On the  other  hand,  after  a                                                               
termination  event, the  state  will  have directly  participated                                                               
financially.   The purpose of Amendment  40 is to ensure  that if                                                               
the project  does not proceed  to FID  but stalls, the  state has                                                               
full  access to  the data  for which  it has  paid $600  million.                                                               
Representative Seaton concluded that  Amendment 1 to Amendment 40                                                               
ensures the relationships  agreed to with TransCanada  in the MOU                                                               
are not interrupted.                                                                                                            
                                                                                                                                
CO-CHAIR  SADDLER  stated  his   opposition  to  Amendment  1  to                                                               
Amendment 40.                                                                                                                   
                                                                                                                                
REPRESENTATIVE TARR  observed that  data not  already established                                                               
in  the MOU  with TransCanada  would come  from the  work of  the                                                               
first  joint venture  during  Pre-FEED.   She  asked whether  the                                                               
state needs to  address access to the data specific  to the joint                                                               
venture  work  because the  state's  participation  would not  be                                                               
direct  or indirect,  but through  AGDC's position  in the  joint                                                               
venture.                                                                                                                        
                                                                                                                                
8:40:35 AM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI  reminded the  committee  that  the terms  of  the                                                               
termination  events  as described  in  the  MOU will  be  further                                                               
developed and expanded.  In  the HOA are found principles related                                                               
to the  sharing, access,  and use of  data by  the administration                                                               
and  the parties.   The  Alaska  Gasline Development  Corporation                                                               
will be "in the room" on  substantial portions of the project and                                                               
now,  with  the amendments  made  by  this committee,  indirectly                                                               
through the commissioner of natural  resources on the development                                                               
of the transportation agreements.   During the development of the                                                               
commercial terms that  govern how data is shared and  used by the                                                               
Pre-FEED joint venture  agreement (JVA), AGDC will  be working on                                                               
the state's  behalf to ensure  that the principle of  the state's                                                               
access to data is upheld.                                                                                                       
                                                                                                                                
CO-CHAIR FEIGE noted that the  state's agreement with TransCanada                                                               
and the  terms regarding the  data after a termination  event are                                                               
well-explained on  page 9 of  Exhibit C of  the MOU [Key  Item 9,                                                               
Termination Event Alaska LNG Midstream  Services Term Sheet].  He                                                               
surmised that because Amendment 40  pertains to the other parties                                                               
to the  future JVA,  or other contracts,  the word  "directly" is                                                               
necessary.                                                                                                                      
                                                                                                                                
8:43:17 AM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI   responded  that  the  suggestion   of  the  word                                                               
"directly"   was  to   recognize  that   there  is   an  indirect                                                               
relationship  in   the  midstream,  and  the   specifics  of  how                                                               
TransCanada's interest is  conveyed to the state are  in the MOU.                                                               
The administration's concern  is about the introduction  of a new                                                               
subjective standard - "if the  commissioner determines that" - to                                                               
what  is  a  detailed commercial  arrangement  where  termination                                                               
events are  defined to both  parties, so they are  not subjective                                                               
as the  project moves through  the FEED stage.   During Pre-FEED,                                                               
there  is   acceptance  of  a   90-day  termination   event  with                                                               
TransCanada for  any reason,  because there is  a lower  level of                                                               
commitment  before  FID is  made.    Although this  amendment  is                                                               
applicable prior to FID, he remarked:                                                                                           
                                                                                                                                
     It's  [that] subjectivity  that  I  think creates  more                                                                    
     confusion  in  what  [are]  commercial  terms  and  how                                                                    
     they'll be  executed.  That's  why I think some  of the                                                                    
     [discomfort]  comes  from,   related  directly  to  the                                                                    
     TransCanada memorandum  of understanding, and  the word                                                                    
     "directly."                                                                                                                
                                                                                                                                
CO-CHAIR FEIGE inquired  as to whether [Amendment  1 to Amendment                                                               
40] is a support for the  process, or creates a limitation on the                                                               
administration's ability to negotiate in the future.                                                                            
                                                                                                                                
MR. PAWLOWSKI said he viewed  the word "directly" as a clarifying                                                               
term.  He deferred to the commissioner of natural resources.                                                                    
                                                                                                                                
8:45:49 AM                                                                                                                    
                                                                                                                                
JOE  BALASH,  Commissioner,   Department  of  Natural  Resources,                                                               
speaking as  Commissioner-appointee to the Department  of Natural                                                               
Resources, assured the committee  the principle identified by the                                                               
[amendment  and the  amendment to  the  amendment] is  consistent                                                               
with the state's  policy.  In this context, the  insertion of the                                                               
word "directly"  introduces the question  of timing;  the state's                                                               
direct financial  participation becomes relevant if,  or when, it                                                               
makes  a  payment,  which  is  not  direct  involvement,  but  an                                                               
extension of the state's credit.   At the point in time the state                                                               
makes  a  payment,  it has  participated  directly,  financially.                                                               
Commissioner Balash opined the word  "directly" helps relative to                                                               
the  state's   relationship  with   TransCanada,  but   does  not                                                               
necessarily  help  in the  state's  relationship  with AGDC;  for                                                               
example, at  the time the  commissioner of natural  resources and                                                               
the  president of  AGDC have  to make  an agreement  on midstream                                                               
services for the liquefaction plant.   He questioned whether AGDC                                                               
is directly  involved from the beginning  due to its status  as a                                                               
public corporation.   He restated that the insertion  of the word                                                               
"directly"  helps in  the case  of the  TransCanada MOU,  but was                                                               
unsure if it was helpful in the case of arrangements with AGDC.                                                                 
                                                                                                                                
MR. DUBLER  agreed with  the testimonies  of the  commissioner of                                                               
natural resources and the deputy commissioner of revenue.                                                                       
                                                                                                                                
REPRESENTATIVE  P.   WILSON  asked   for  an  opinion   from  the                                                               
Department of  Law (DOL) on  its interpretation of the  effect of                                                               
Amendment 1 to Amendment 40.                                                                                                    
                                                                                                                                
8:50:03 AM                                                                                                                    
                                                                                                                                
MARY GRAMLING,  Assistant Attorney  General, Oil, Gas  and Mining                                                               
Section,  Civil  Division  (Juneau),  Department  of  Law  (DOL),                                                               
advised  that the  addition of  the  word "directly"  potentially                                                               
limits the type of participation  considered under the amendment.                                                               
%he type  of the financial  participation would be  determined by                                                               
the terms of the contract and how the state has been involved.                                                                  
                                                                                                                                
MR.  PAWLOWSKI stated  it is  difficult to  put commercial  terms                                                               
into statute  due to the  nuances of negotiated agreements.   The                                                               
administration  agrees   with  the  principle  in   the  proposed                                                               
statute; however,  unintended consequences around the  words when                                                               
it comes to the commercial  agreements are a problem in Amendment                                                               
1 to Amendment 40, and, more broadly, in Amendment 40.                                                                          
                                                                                                                                
8:52:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON removed her  objection to Amendment 1 to                                                               
Amendment 40.                                                                                                                   
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
A roll  call vote  was taken.   Representatives  Johnson, Seaton,                                                               
Tarr,  Kawasaki, and  Feige  voted  in favor  of  Amendment 1  to                                                               
Amendment  40.   Representatives  Hawker, Olson,  P. Wilson,  and                                                               
Saddler voted  against it.   Therefore, Amendment 1  to Amendment                                                               
40 was adopted by a vote of 5-4.                                                                                                
                                                                                                                                
8:53:36 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE returned discussion to Amendment 40.                                                                             
                                                                                                                                
CO-CHAIR  SADDLER   expressed  his   concern  about   giving  the                                                               
commissioner  [of  natural  resources] the  unilateral  right  to                                                               
declare that there has not  been adequate progress.  Although not                                                               
a real  termination event, this  declaration may lead to  "a path                                                               
to failure."   He requested clarification on what  data the state                                                               
would  have access  to  during contract  negotiations  - after  a                                                               
finding of insufficient  progress or after termination  - that it                                                               
would not have otherwise.                                                                                                       
                                                                                                                                
MR. PAWLOWSKI deferred to AGDC.                                                                                                 
                                                                                                                                
MR. DUBLER responded  that some of the data acquired  by AGDC and                                                               
applied to the  Alaska LNG Project, from  the AGIA-based project,                                                               
includes  geologic borehole  data, which  helps determine  how to                                                               
best  drill through  the subsurface,  stream-crossing data,  fish                                                               
surveys,   cultural  resource   surveys,  and   other  Geological                                                               
Information System (GIS)  data that helps the  engineers that are                                                               
designing the pipeline.                                                                                                         
                                                                                                                                
8:56:20 AM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER  asked whether this  information is the  type of                                                               
data that would become available  under contract negotiations for                                                               
the Alaska LNG Project.                                                                                                         
                                                                                                                                
MR. DUBLER replied  correct, and added that  if AGDC participates                                                               
in  the midstream,  which would  exercise the  40 percent  buy-in                                                               
option for the state, AGDC  would have access to that information                                                               
through the Alaska LNG Project.   However, because AGDC would not                                                               
be an  owner in  the midstream,  but only  in the  joint venture,                                                               
AGDC's ability to access data has not been determined.                                                                          
                                                                                                                                
CO-CHAIR SADDLER then asked what  "new" data the state would have                                                               
access to if there were a declaration of inadequate progress.                                                                   
                                                                                                                                
MR.  DUBLER  cautioned  a declaration  of  insufficient  progress                                                               
which caused the project to  "wind up" would not necessarily give                                                               
the state unfettered access to data.   The Alaska LNG Project has                                                               
restrictions  on  the release  of  data;  thus,  as long  as  the                                                               
producers think the project is  going forward, the data would not                                                               
be available to be used on a different project.                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON pointed  out Amendment  40 would  preclude                                                               
the aforementioned problem,  which is that if  the project stalls                                                               
for many years, the  state could not use the data  it paid for to                                                               
design another project.  The problem  right now is that the state                                                               
would pay for 25 percent of the  data, and not wait until FID [to                                                               
make  its investment  of $600  million],  but if  the project  is                                                               
delayed,  the data  is  unavailable.   He  acknowledged that  the                                                               
state would  not have access  to licenses, but would  have access                                                               
to  information  such as  that  on  compression station  spacing,                                                               
which would be of  value to a different project.   He warned of a                                                               
situation where the  state has made an investment  of 25 percent,                                                               
but  is unable  to benefit  due to  the terms  of the  Alaska LNG                                                               
Project.   Amendment 40 asserts that  each party is a  "tenant of                                                               
the  entirety of  the data  if the  project doesn't  go forward."                                                               
Representative Seaton  stressed that each  party will be  able to                                                               
use  the data.   Furthermore,  prior  agreements have  determined                                                               
what constitutes  adequate progress, so Amendment  40 would apply                                                               
to a  situation in  which the project  languishes, and  the state                                                               
would not  have to  prove that  the project  was uneconomic.   He                                                               
reiterated that Amendment 40 establishes  tenants by the entirety                                                               
of the data,  only after timelines that have  already been agreed                                                               
upon have been met.                                                                                                             
                                                                                                                                
9:02:41 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE observed that there  are two elements to Amendment                                                               
40.  First  is the determination by the  commissioner [of natural                                                               
resources]  that the  project is  not  making adequate  progress,                                                               
which is a  matter of judgment or further  definition, and second                                                               
is that the terms are not  more restrictive than the terms of the                                                               
other parties to the project.   He requested the administration's                                                               
advice on what would constitute  not making adequate progress and                                                               
on  the  terms   for  sharing  data  that   are  currently  under                                                               
consideration.                                                                                                                  
                                                                                                                                
COMMISSIONER  BALASH,  regarding  the determination  of  adequate                                                               
progress,  opined the  state is  approaching the  project through                                                               
the HOA  which has established  a stage-gated set  of mechanisms.                                                               
There  will be  one  agreement to  advance  through Pre-FEED  and                                                               
another to advance through FEED, and  at that point there will be                                                               
a "bundle  of work  products and deliverables."   If  parties are                                                               
not ready  to advance at that  point on the timeline,  the reason                                                               
must   be   determined:     underlying   financial   catastrophe;                                                               
fundamental  disruption  in  the   marketplace;  or  other.    He                                                               
suggested Amendment  40 provides  leverage that could  be useful,                                                               
but may  cause a  problem in getting  agreements executed  on the                                                               
front-end  because of  fear  about  how the  state  may use  that                                                               
leverage.  He  said his view of adequate  progress is progressing                                                               
from each  phase or  gate into  the next  as follows:   Pre-FEED,                                                               
FEED, sanction, the deliverables  associated with each phase, and                                                               
the decisions  to progress  from one to  another.   Regarding the                                                               
typical  terms   applied  to  data-sharing  in   the  agreements,                                                               
Commissioner  Balash said  it is  not unusual  for each  party to                                                               
have  access to  the data  and deliverables;  however, there  are                                                               
limitations  as  to  how  the  data can  be  used  publically  or                                                               
competitively, and  that is  where the  limitations such  as time                                                               
limits or  exclusivity, must be  negotiated.   The administration                                                               
remains steadfast in  its stance that all of  the data associated                                                               
with  the  pipeline,  and  the  corridor  for  the  pipeline,  is                                                               
available to the state for its  use in the event the project does                                                               
not go forward.  Under these  terms, it would not matter what the                                                               
other parties do, and the state maintains a level of leverage.                                                                  
                                                                                                                                
9:07:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  stated that the MOU  "bill-package" gives                                                               
up state ownership and control  of state resources.  He expressed                                                               
his belief that at completion,  the agreements will subjugate the                                                               
state to the role of junior partner at best.  He remarked:                                                                      
                                                                                                                                
     I  use  the  word  clawback [provision  that  money  or                                                                    
     benefits need  to be returned]  because I  think that's                                                                    
     what  it's  going to  take,  to  clawback any  of  that                                                                    
     ownership  or control,  is going  to be  something that                                                                    
     I'm  going to  have a  hard time  not supporting.   ...                                                                    
     This doesn't  get us anywhere  near where I want  to be                                                                    
     in  terms  of  either  of those  ownership  or  control                                                                    
     issues. ... This doesn't get  us close to where I think                                                                    
     we  need to  be in  terms of  recapturing some  of that                                                                    
     control and  ownership, but I  think I have  to support                                                                    
     it just because it's so far  the best thing ... to give                                                                    
     us even a little bit.                                                                                                      
                                                                                                                                
REPRESENTATIVE  TARR shared  others' concerns  about how  to move                                                               
forward after the  failure of the project.   Noting the five-year                                                               
clause  that is  incorporated in  the MOU  with TransCanada,  she                                                               
observed  that it  seems reasonable  to restrict  how one  of the                                                               
parties  might  move  forward  in  the event  of  failure.    She                                                               
surmised Amendment  40 gives  the administration  some direction,                                                               
and alerts the parties that the  state intends to possess and use                                                               
assets towards a new project.                                                                                                   
                                                                                                                                
9:10:04 AM                                                                                                                    
                                                                                                                                
COMMISSIONER  BALASH  recalled  that   part  of  the  reason  the                                                               
administration  is comfortable  with pursuing  parallel paths  on                                                               
two pipelines, ASAP  and the Alaska LNG Project,  in the Pre-FEED                                                               
phase,  is to  have cooperation  and a  sharing of  the costs  of                                                               
gathering data.   He  stated that AGDC  will continue  to acquire                                                               
data and  information to move  forward with ASAP in  the Pre-FEED                                                               
stage,  regardless.    However,  the  major  investment  that  is                                                               
required  to advance  into  the  FEED phase,  and  the terms  and                                                               
conditions around  the use of data  in the event of  a failure to                                                               
advance the project  further, may inform the  decision on whether                                                               
state resources are available for the ASAP project.                                                                             
                                                                                                                                
9:12:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  suggested  other   language  to  prevent  a                                                               
similar  issue  as  the  five-year  provision  with  TransCanada.                                                               
Important  for her  is  that  the state  is  not prohibited  from                                                               
taking  a  new path  by  a  time  limitation.   She  offered  the                                                               
following:                                                                                                                      
                                                                                                                                
       There couldn't be a limitation on the state moving                                                                       
     forward on a similar project.                                                                                              
                                                                                                                                
COMMISSIONER   BALASH   acknowledged    that   those   kinds   of                                                               
conversations  have occurred.    However,  the proprietary  value                                                               
associated with this data and whether  it will be used to compete                                                               
with the other  parties is the "sensitivity that we  will have to                                                               
work around."   There is no opposition to  the state constructing                                                               
a pipeline  to deliver  gas to Alaskans,  but the  problem arises                                                               
when the  state proposes  to sell  to others.   He  observed this                                                               
matter must be left to negotiation and agreement by the parties.                                                                
                                                                                                                                
9:14:06 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  returned attention  to Amendment  40 and                                                               
the  issue  of the  determination  of  adequate progress  by  the                                                               
commissioner [of natural resources].   He posed the scenario of a                                                               
commissioner determining that there  was not adequate progress at                                                               
a time the state was not in a position to terminate.                                                                            
                                                                                                                                
COMMISSIONER  BALASH expected  that the  commensurate commitments                                                               
within the  phased agreements will have  sufficient definition to                                                               
provide objective measures.  As  such, there will be deliverables                                                               
or a measurable  scope of work to be accomplished  by the project                                                               
at each  phase.  If there  is a point where  the deliverables are                                                               
in hand,  and the parties are  not prepared to proceed,  the next                                                               
steps and decisions to  be made will be apparent.    On the other                                                               
hand, the  hardest areas  to measure will  be the  progression of                                                               
the  marketing agreements  for the  sale of  LNG, because  of the                                                               
limitations imposed on the parties  by anti-trust concerns.  This                                                               
is the  one area  where measuring  progress will  be challenging.                                                               
In  further  response  to Representative  Kawasaki,  Commissioner                                                               
Balash said the definition of  adequate progress found in the MOU                                                               
is  sufficient  for  the  subjects   of  data,  information,  and                                                               
drawings - which are definable  - but commercial areas are harder                                                               
to measure.                                                                                                                     
                                                                                                                                
CO-CHAIR SADDLER  described the benefits of  building the project                                                               
with and without  partners, and asked whether  Amendment 40 gives                                                               
the  state access  to  data  that can  be  used commercially,  or                                                               
whether the data remains subject to contract negotiations.                                                                      
                                                                                                                                
COMMISSIONER BALASH  opined Amendment  40 gives the  state access                                                               
to  the data,  but  does  not speak  to  any  limitations on  the                                                               
state's use of the data.                                                                                                        
                                                                                                                                
9:18:50 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER  asked  for  the meaning  of  "tenants  of  the                                                               
entirety" and if  the principle applies to all  of the agreements                                                               
or  solely  to  the  sharing  of  data  in  the  agreement  under                                                               
discussion.                                                                                                                     
                                                                                                                                
COMMISSIONER BALASH deferred to the Department of Law.                                                                          
                                                                                                                                
CHRIS POAG,  Assistant Attorney General, Labor  and State Affairs                                                               
Section, Civil  Division (Juneau),  Department of  Law, qualified                                                               
he is  not a property or  estate lawyer, and provided  an example                                                               
of tenants in the entirety.   He remarked:                                                                                      
                                                                                                                                
     The concept  would be:   The whole is equally  owned by                                                                    
     each, and if  one leaves the party,  the other entirely                                                                    
     owns it, and we don't  have to go fight about ownership                                                                    
     interests.                                                                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER  asked whether  the "overall  construct" of                                                               
the HOA  and the MOU places  the parties of the  project as joint                                                               
tenants or as tenants in the entirety.                                                                                          
                                                                                                                                
MR. POAG  qualified he was  not involved  in the drafting  of the                                                               
HOA or  the MOU,  but expressed  his belief  that the  project is                                                               
"more of a joint tenancy."                                                                                                      
                                                                                                                                
9:22:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  referred  to previous  testimony  that  the                                                               
amendment relates  to access  to the data,  but does  not address                                                               
how the data  can be used.  Her understanding  of Amendment 40 is                                                               
that it directs  that when the contract is  negotiated, access to                                                               
data  is to  be a  provision of  that contract.   She  asked what                                                               
would happen if  the amendment was adopted but  the other parties                                                               
refused to include the provision in the contract.                                                                               
                                                                                                                                
COMMISSIONER BALASH  referred to  the last sentence  of Amendment                                                               
40 which read:                                                                                                                  
                                                                                                                                
      Access by the state to the data may not be on terms                                                                       
       that are more restrictive than the terms that are                                                                        
     applicable for access  by any other party  in the North                                                                    
     Slope natural gas project.                                                                                                 
                                                                                                                                
COMMISSIONER  BALASH  opined  this  sentence says  that  all  the                                                               
parties  have to  agree to  treat  each other  equally, thus  all                                                               
could agree  that all the  parties can have  a copy of  the data,                                                               
but that  would not ensure  that the  data can be  used publicly.                                                               
He remarked:                                                                                                                    
                                                                                                                                
     That  doesn't get  us  where  I believe  Representative                                                                    
     Seaton  wants   to  go,   and  so   I'm  not   sure  it                                                                    
     accomplishes that  particular goal in that  regard, so,                                                                    
     and believe me,  that's not something we  would seek to                                                                    
     achieve  or  agree  to, and  I'm  not  suggesting  that                                                                    
     that's  what  any  of the  parties  has  talked  about,                                                                    
     either.   But one thing I  did just want to  say on the                                                                    
     point  of   "joint"  versus  "entirety,"  is   in  this                                                                    
     particular phase  that we're talking about  with regard                                                                    
     to Pre-FEED,  we're largely talking  about information,                                                                    
     and  I would  characterize the  conversations there  as                                                                    
     more  of   the  tenant   variety,  in  terms   of  cost                                                                    
     allocation and  ownership of information.   But when it                                                                    
     comes  to   things  that   are  indivisible   assets  -                                                                    
     property, land,  whatever - those  are the  things that                                                                    
     are going  to be more  of the "joint" flavor,  in terms                                                                    
     of who's paid for what and gets what.                                                                                      
                                                                                                                                
9:24:50 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  proposed  language   for  Amendment  40  as                                                               
follows:                                                                                                                        
                                                                                                                                
     Page 1, line 10, after "financially":                                                                                      
          Insert ", without restrictions on how that data                                                                       
          could be used."                                                                                                       
                                                                                                                                
REPRESENTATIVE TARR  explained this addition would  put the state                                                               
closer  to its  goal, and  asked whether  this addition  would be                                                               
looked at unfavorably by the other parties.                                                                                     
                                                                                                                                
COMMISSIONER BALASH advised  the aforementioned specific language                                                               
would present a  challenge since all of the  parties are prepared                                                               
to advance  their share of  the costs  "and treat each  other the                                                               
same."  However,  if the state were able to  unilaterally use the                                                               
data, the other parties would be justified in their opposition.                                                                 
                                                                                                                                
REPRESENTATIVE  TARR  pointed  out that  her  suggested  language                                                               
would be  used in the  situation where adequate progress  was not                                                               
being made and the project was stalled.                                                                                         
                                                                                                                                
COMMISSIONER BALASH  cautioned that  the partners in  the project                                                               
have  certain commitments  and fidelity  to each  other with  the                                                               
goal of continuing the progress of  a major project.  The parties                                                               
are  prepared to  share costs  and information  in a  manner that                                                               
benefits  all, but  not if  their investment  can potentially  be                                                               
revealed to their competitors.                                                                                                  
                                                                                                                                
9:27:07 AM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER proposed language for Amendment 40 as follows:                                                                 
                                                                                                                                
     Page 1, line 8, after "access to":                                                                                         
          Insert "and commercial use of"                                                                                        
                                                                                                                                
CO-CHAIR  SADDLER acknowledged  this addition  would also  give a                                                               
party the  unilateral right  to pull  out and use  the data  in a                                                               
competing commercial  project.  He  agreed with others  about the                                                               
concern  that the  project could  die of  neglect, and  the state                                                               
would want the opportunity to make progress on a second project.                                                                
                                                                                                                                
REPRESENTATIVE SEATON  pointed out  that there have  been several                                                               
previous revisions  of Amendment  40.   He assured  the committee                                                               
the  language of  the amendment  was thoroughly  reviewed by  the                                                               
producers and state agencies.                                                                                                   
                                                                                                                                
CO-CHAIR SADDLER maintained his objection to Amendment 40.                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON referred  to  the  problem of  "subjective                                                               
standard of  decision."  He was  reluctant to put a  deadline for                                                               
FID in the  amendment, as the project  should progress naturally.                                                               
He  concluded that  if the  project  fails due  to economics,  in                                                               
return  for an  investment of  $600 million  the state  should be                                                               
able to use the data in the same way as the producers.                                                                          
                                                                                                                                
9:32:34 AM                                                                                                                    
                                                                                                                                
A  roll call  vote was  taken.   Representatives Johnson,  Olson,                                                               
Seaton, P.  Wilson, Tarr, Kawasaki,  and Feige voted in  favor of                                                               
Amendment  40, as  amended.   Representatives Hawker  and Saddler                                                               
voted  against it.    Therefore, Amendment  40,  as amended,  was                                                               
adopted by a vote of 7-2.                                                                                                       
                                                                                                                                
9:33:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Amendment 41, labeled 28-                                                                  
GS2806\I.A.103, Bullock, 4/8/14, which read:                                                                                    
                                                                                                                                
     Page 15, following line 30:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 16. AS 38.05 is amended by adding a new                                                                     
     section to read:                                                                                                           
          Sec. 38.05.023. Limitation on the application of                                                                    
     a  payment   in  lieu  of  property   tax.  A  proposed                                                                  
     agreement  or contract  associated with  a North  Slope                                                                    
     natural gas  project may not  include a  provision that                                                                    
     changes a payment  in lieu of property  tax on property                                                                    
     that was previously taxable under AS 43.56."                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
REPRESENTATIVE JOHNSON objected for the purpose of discussion.                                                                  
                                                                                                                                
REPRESENTATIVE  SEATON explained  Amendment 41  would disallow  a                                                               
provision in an  agreement or contract on the  Alaska LNG Project                                                               
that changes a  payment in lieu of property tax  on property that                                                               
was previously taxable  under AS 43.56.   Therefore, the existing                                                               
oil  and gas  properties that  are paying  property taxes  to the                                                               
state and municipalities  would not be included  in the provision                                                               
of the bill that allows payment in lieu of taxes.                                                                               
                                                                                                                                
CO-CHAIR FEIGE  surmised payments in  lieu of taxes  (PILT) would                                                               
only  apply to  new infrastructure  that directly  pertains to  a                                                               
North Slope gas project.                                                                                                        
                                                                                                                                
9:34:53 AM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI said  the intent  of Amendment  41 is  good.   The                                                               
intent  of  the administration  is  to  bring the  municipalities                                                               
together for  a public discussion  through the  [interim advisory                                                               
board to  advise on  the municipal  involvement provision  in the                                                               
bill].   The  consensus  recommendation of  the advisory  [board]                                                               
will  determine  "what we  bring  to  the  table."   The  HOA  is                                                               
specific to the  Alaska LNG Project, but the  amendment "may take                                                               
things off  the table, if a  group wishes to discuss  those."  He                                                               
assured the committee it is  not the intent of the administration                                                               
to delve into PILT for previously taxable property.                                                                             
                                                                                                                                
9:36:08 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON  asked  whether   there  are  any  shared                                                               
facilities related to oil production  that may be also related to                                                               
gas production,  and that may garner  property tax and PILT.   In                                                               
addition, if the oil and gas  projects share assets, there may be                                                               
an issue about paying double taxes.                                                                                             
                                                                                                                                
MR. PAWLOWSKI  clarified that the  relative key provision  in HOA                                                               
is the  definition of the  Alaska LNG  Project, which is  the new                                                               
infrastructure  including transmission  lines from  Point Thomson                                                               
to the gas treatment plant  (GTP), and the transmission line from                                                               
Prudhoe  Bay to  the  GTP,  so there  really  is  not the  shared                                                               
infrastructure.    Upstream,   additional  development  of  Point                                                               
Thomson, is a  little different, but that is not  included in the                                                               
Heads of Agreement here.                                                                                                        
                                                                                                                                
CO-CHAIR FEIGE  observed that Amendment 41  addresses the concern                                                               
of  some municipalities  that the  PILT provision  [in the  bill]                                                               
would extend  to oil  property taxes.   He  stated that  the PILT                                                               
provision  would apply  specifically  to  the new  infrastructure                                                               
associated  with the  Alaska  LNG Project  or  other North  Slope                                                               
pipeline projects.                                                                                                              
                                                                                                                                
9:38:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  expressed her  support for Amendment  41 and                                                               
related  that  the  mayor  of  Barrow  said  local  revenue  from                                                               
property taxes is a significant issue for Barrow.                                                                               
                                                                                                                                
MR.  PAWLOWSKI  reiterated  that  changes  to  property  tax  are                                                               
achieved through  law and  not through a  contract; in  fact, any                                                               
changes to  property tax must  be brought to the  legislature for                                                               
authorization.   He advised that  Amendment 41 is  restrictive to                                                               
the  administration   and  its   ability  to   execute  executive                                                               
privilege.  He remarked:                                                                                                        
                                                                                                                                
     ...  the  terms  need  to be  authorized,  need  to  be                                                                    
     enacted by  the legislature  prior to inclusion  in the                                                                    
     contract,  we  think  that's an  important  distinction                                                                    
     from this process and previous processes.                                                                                  
                                                                                                                                
REPRESENTATIVE  KAWASAKI  expressed  his  and  his  constituents'                                                               
concern  that the  administration seeks  an opportunity  to shift                                                               
the tax burden  away from a project in order  to favorably affect                                                               
the  economics  of said  project.    He  stated his  support  for                                                               
Amendment  41.   He  then  asked  the  sponsor of  the  amendment                                                               
whether new and additional structures "might be part of a PILT."                                                                
                                                                                                                                
REPRESENTATIVE SEATON  reminded the  committee that  property tax                                                               
on oil  and gas is  not a municipal tax  but is a  state property                                                               
tax.   Amendment 41  directs that state  property taxes  under AS                                                               
43.56 are  not to be changed  to a different form  for the Alaska                                                               
LNG Project.                                                                                                                    
                                                                                                                                
9:42:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON removed  his objection  to Amendment  41.                                                               
There being no further objection, Amendment 41 was adopted.                                                                     
                                                                                                                                
9:42:35 AM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER moved to adopt Amendment 42, labeled 28-                                                                       
GS2806\I.A.101, Bullock, 4/7/14 which read:                                                                                     
                                                                                                                                
     Page 53, following line 14:                                                                                                
     Insert a new bill section to read:                                                                                         
        "*  Sec. 58.  The  uncodified law  of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          AGREEMENTS   AND   CONTRACTS   RELATING   TO   THE                                                                    
     TRANSPORTATION  OF NATURAL  GAS.  (a)  An agreement  or                                                                    
     contract entered into by the  state or an agency of the                                                                    
     state  for the  transportation of  natural gas  may not                                                                    
     allow a  transporter to have  an option  to participate                                                                    
     in  an in-state  natural gas  pipeline project  that is                                                                    
     primarily  intended  to  make  natural  gas,  including                                                                    
     propane and other  hydrocarbons associated with natural                                                                    
     gas  other  than  oil,   available  to  Fairbanks,  the                                                                    
     Southcentral   region   of   the   state,   and   other                                                                    
     communities in the state at the lowest rates possible.                                                                     
          (b)  In this section, "transporter" means a                                                                           
     person  providing gas  treatment  plant processing  and                                                                    
     natural  gas  transportation  services in  natural  gas                                                                    
     pipelines   and  gas   transmission   lines  that   are                                                                    
     components of an Alaska  liquefied natural gas project,                                                                    
     as that term is  defined in AS 31.25.390(7), enacted by                                                                    
     sec. 12 of this Act."                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "61"                                                                                                           
          Insert "62"                                                                                                           
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
9:42:54 AM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE objected for the purpose of discussion.                                                                          
                                                                                                                                
CO-CHAIR  SADDLER explained  Amendment 42  seeks to  clarify [Key                                                               
Item  9, Termination  Event, Alaska  LNG Midstream  Services Term                                                               
Sheet, Exhibit C]  in the MOU, which  reads [original punctuation                                                               
provided]:                                                                                                                      
                                                                                                                                
     Shipper's  Rights  To  Terminate  (Shipper  Termination                                                                    
     Event):                                                                                                                    
          Prior to FEED:                                                                                                        
               Any time provided a 90-day notice is given                                                                       
          to Transporter.                                                                                                       
          From start of FEED through FID:                                                                                       
               Within 60 days from the date one or more ANS                                                                     
          Producers or Transporter withdraws from the                                                                           
          Alaska LNG Project                                                                                                    
               At any time if Shipper (or the ANS                                                                               
          Producers, if the SOA elects RIV) is unable to                                                                        
          sign agreements to sell all of its royalty or tax                                                                     
          gas on terms acceptable to Shipper.                                                                                   
          At FID, for any reason.                                                                                               
                                                                                                                                
     Transporter    Rights    to   Terminate    (Transporter                                                                    
     Termination Event):                                                                                                        
          Legislature fails to provide statutory authority                                                                      
          to DNR/DOR to enter into PAs by June 30, 2014.                                                                        
          Shipper fails to execute the PA within the                                                                            
          specified time.                                                                                                       
          Shipper fails to execute the FTSA by December 31,                                                                     
          2015.                                                                                                                 
          Shipper fails to maintain the standard of                                                                             
          Creditworthiness Requirements.  Transporter shall                                                                     
          provide notice to Shipper of a failure to meet                                                                        
          such standards, and Shipper shall have a                                                                              
          reasonable period to cure.                                                                                            
          At FID, if all Transporter corporate/Board                                                                            
          approvals have not been obtained.                                                                                     
          Within 3 months from FID, if debt financing has                                                                       
          not been secured on terms and conditions                                                                              
          satisfactory   to   Transporter    in   its   sole                                                                    
          discretion                                                                                                            
                                                                                                                                
     Either Transporter or Shipper may terminate:                                                                               
          If term(s) of the FEED Agreement or Definitive                                                                        
          Agreements is/are not acceptable to Shipper or                                                                        
          Transporter                                                                                                           
          Within 90 days from the date of issuance of any                                                                       
          final regulatory authorizations, certificates, or                                                                     
          permits that includes material unacceptable                                                                           
          conditions(s) or requirements(s) to Transporter                                                                       
          or Shipper                                                                                                            
          At FID, if not all right-of-ways, easements and                                                                       
          land leases have been secured                                                                                         
                                                                                                                                
     Conveyance of  Transporter Alaska LNG  Project Interest                                                                    
     to Shipper:                                                                                                                
          Upon a Termination Event and payment to                                                                               
          Transporter of the Development Costs, and the                                                                         
          associated AFUDC, as applicable, Transporter                                                                          
          shall assign all of its interest in the Pre-FEED                                                                      
          JVA or the FEED Agreement, including all of its                                                                       
          equity stake in the AKLNG Project, to the Shipper                                                                     
          promptly without addition consideration.  Any                                                                         
          such assignment shall be made on an "as is, where                                                                     
          is" basis, without representation or warranty of                                                                      
          any kind by Transporter.                                                                                              
          Within a period of 5 years of SOA exercising its                                                                      
          termination right, if SOA participates in a                                                                           
          pipeline project to commercialize North Slope gas                                                                     
          that is substantially similar to the Alaska LNG                                                                       
          Project, SOA shall offer to Transporter an option                                                                     
          to participate in the GTP and Pipelines of such                                                                       
          project on terms and conditions consistent with                                                                       
          those set forth in this Term Sheet, except the                                                                        
          cost of debt and ROE to be negotiated based on                                                                        
          conditions existing at the time.  The SOA shall                                                                       
          not be obligated to offer the foregoing option to                                                                     
          the Transporter if:                                                                                                   
          i.   the Transporter is in material default of                                                                        
          the PA or FTSA at the time of the termination,                                                                        
          and                                                                                                                   
         ii.   the  material default  was  capable of  being                                                                    
          remedied, and                                                                                                         
        iii.  Transporter  was  offered  a  reasonable  time                                                                    
          period to remedy the material default and failed                                                                      
          to do so.                                                                                                             
                                                                                                                                
9:43:07 AM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER  explained the aforementioned  provision directs                                                               
that  if  an  agreement  between TransCanada  and  the  state  is                                                               
terminated, for the next five  years TransCanada has the right of                                                               
first  refusal on  any gas  pipeline project  in which  the state                                                               
becomes involved that is substantially  similar to the Alaska LNG                                                               
Project.     He  said  he   was  looking  for  a   definition  of                                                               
substantially similar  that would  positively indicate  whether a                                                               
small-diameter, in-state pipeline is  similar to a large-diameter                                                               
pipeline  for  the  export  of natural  gas.    Co-Chair  Saddler                                                               
expressed his  concern that  if the  Alaska LNG  Project falters,                                                               
there would be a threat to  ASAP.  Amendment 42 would ensure that                                                               
TransCanada would not use its  negotiated right to participate in                                                               
the in-state  line, and that  a project with the  primary purpose                                                               
of delivering affordable natural gas  for use within the state is                                                               
not  substantially  similar  to  the  Alaska  LNG  Project.    He                                                               
described  previous iterations  of Amendment  42 and  assured the                                                               
committee the concerns of the  administration were addressed.  In                                                               
the amendment,  the in-state pipeline  project is defined  as one                                                               
that "has the primary purpose  of making natural gas available to                                                               
Fairbanks, Southcentral,  and other  communities in the  state at                                                               
the lowest possible rates."   Further, the amendment does not bar                                                               
AGDC from  involving TransCanada if  desired.  He  concluded that                                                               
the amendment  protects TransCanada's rights to  a large pipeline                                                               
and protects the  state's ability to pursue  an in-state pipeline                                                               
if the large pipeline falters.                                                                                                  
                                                                                                                                
9:45:38 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER   pointed  out   the  difference   in  the                                                               
presentation of  Amendment 42, during  which was  stated "primary                                                               
purpose,"  and   the  language  in   the  amendment,   which  was                                                               
"primarily intended."   He opined that is  a material difference.                                                               
Already  in  the  MOU  is  the  undefined  clause  "substantially                                                               
similar" and  the amendment complicates the  circumstances by the                                                               
use of substantially similar or  primarily intended - a "doubling                                                               
of the  standard of ambiguity."   Representative Hawker suggested                                                               
a  different amendment  that  directs the  state  to develop  its                                                               
contracts,  such  as  the  FTSA,  to  set  a  better  contractual                                                               
definition of  substantially similar  in the business  terms that                                                               
are  being   negotiated,  rather  than  adding   a  second  vague                                                               
standard.  He said the amendment  fails to clarify a vague clause                                                               
by increasing the density of the fog.                                                                                           
                                                                                                                                
9:47:48 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR   suggested  using   Amendment  42   as  the                                                               
opportunity  to   define  substantially  similar.     In  further                                                               
response to Co-Chair  Saddler, she said the  definition would use                                                               
the language in Amendment 42, beginning  on page 1, line 8, after                                                               
"intended," and paraphrased as follows:                                                                                         
                                                                                                                                
     to  make  natural  gas,  including  propane  and  other                                                                    
     hydrocarbons  associated with  natural  gas other  than                                                                    
     oil,  available to  Fairbanks, the  Southcentral region                                                                    
     of the  state, and  other communities  in the  state at                                                                    
     the lowest rates possible.                                                                                                 
                                                                                                                                
REPRESENTATIVE TARR  said this would  be the definition of  a not                                                               
substantially similar project.                                                                                                  
                                                                                                                                
CO-CHAIR SADDLER deferred to the Department of Law.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  called attention to Amendment  42, page 1,                                                               
line 11, which read:                                                                                                            
                                                                                                                                
     at the lowest rates possible.                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON  said  this   statement  makes  a  problem                                                               
because to  achieve the lowest  rates possible the  pipeline must                                                               
be large in  diameter and carry the highest  number of molecules,                                                               
which would  be a substantially  similar pipeline.   He suggested                                                               
Amendment 42 should end at page 1, line 10, which read:                                                                         
                                                                                                                                
     available to Fairbanks, the  Southcentral region of the                                                                    
     state, and other communities in the state                                                                                  
                                                                                                                                
9:50:38 AM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER stated the language  in Amendment 42 is based on                                                               
the  intent of  AGDC's  ASAP  pipeline.   If  the large  diameter                                                               
pipeline project fails  and ASAP proceeds, ASAP  seeks to provide                                                               
gas to Alaskans at the lowest rates possible.                                                                                   
                                                                                                                                
REPRESENTATIVE KAWASAKI  directed attention  to page 3,  line 13,                                                               
paragraph 4, of the bill which read:                                                                                            
                                                                                                                                
     (4)  advance  an  in-state   natural  gas  pipeline  as                                                                    
     described in  the July 1,  2011, project  plan prepared                                                                    
     under former  AS 38.34.040 by  the corporation  while a                                                                    
     subsidiary of  the Alaska Housing  Finance Corporation,                                                                    
     with modifications determined by  the corporation to be                                                                    
     appropriate   to  develop,   finance,  construct,   and                                                                    
     operate  an in-state  natural gas  pipeline in  a safe,                                                                    
     prudent,  economical,  and  efficient manner,  for  the                                                                    
     purpose of  making natural  gas, including  propane and                                                                    
     other  hydrocarbons associated  with natural  gas other                                                                    
     than  oil,  available  to Fairbanks,  the  Southcentral                                                                    
     region  of  the state,  and  other  communities in  the                                                                    
     state at the lowest rates possible;                                                                                        
                                                                                                                                
REPRESENTATIVE KAWASAKI said  the abovementioned descriptor would                                                               
need to be added to Amendment 42.                                                                                               
                                                                                                                                
MR.  PAWLOWSKI acknowledged  Co-Chair Saddler's  many efforts  to                                                               
address this issue.  He  stressed that the in-state pipeline plan                                                               
was designed specifically to allow  the [AGDC board of directors]                                                               
to make modifications  to the project, thus  even while following                                                               
the project plan, the board has  wide latitude to manage how AGDC                                                               
would advance the interests of the state.                                                                                       
                                                                                                                                
9:52:34 AM                                                                                                                    
                                                                                                                                
MR. POAG qualified  he did not participate in  drafting Exhibit C                                                               
to the MOU.  He directed attention to  page 9 of Exhibit C in the                                                               
MOU  [Key  Item  9,  Termination   Event,  Alaska  LNG  Midstream                                                               
Services Term  Sheet] and said  the language  specifically refers                                                               
to  a project  that is  substantially similar  to the  Alaska LNG                                                               
Project, which is  capitalized in the text of the  MOU because it                                                               
is a  defined term  in Article  1.1 (f).   The definition  of the                                                               
Alaska  LNG Project  in the  MOU  extends beyond  "a pipeline  to                                                               
deliver  our  gas  to  our Alaskans"  and  has  many  components,                                                               
including a  marine terminal and  an LNG facility.   Although the                                                               
term substantially similar  is not defined in the  MOU, he opined                                                               
that  a  project that  delivers  gas  to  Alaskans and  does  not                                                               
involve   marine  terminals   or   liquefaction   would  not   be                                                               
substantially  similar.    He  noted   that  the  intent  of  the                                                               
amendment is  to modify  existing language,  and referred  to the                                                               
Alaska State Constitution, Article 1, Section 15, which read:                                                                   
                                                                                                                                
     Prohibited  State Action~No  bill  of  attainder or  ex                                                                    
     post facto law  shall be passed.  No  law impairing the                                                                    
     obligation  of   contracts,  and  no  law   making  any                                                                    
     irrevocable grant  of special privileges  or immunities                                                                    
     shall be  passed.  No conviction  shall work corruption                                                                    
     of blood or forfeiture of estate.                                                                                          
                                                                                                                                
MR. POAG  explained that the  amendment cannot modify  a contract                                                               
that  has  already been  "inked";  however,  the amendment  would                                                               
provide  guidance  to  the   administration  on  future  contract                                                               
negotiations  and  provide  clarity about  the  term  substantial                                                               
similarity.    Mr. Poag  further  advised  that an  in-state  gas                                                               
pipeline is not substantially similar to the Alaska LNG Project.                                                                
                                                                                                                                
9:55:09 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER  understood  that  AGDC has  the  authority  to                                                               
expand the capacity of the ASAP  project in size and volume after                                                               
the AGIA  limitation of [500 million  cubic feet per day  of gas]                                                               
is  terminated.   Furthermore, the  demand for  gas in  Alaska is                                                               
approximately 250 million  cubic feet per day of  gas, thus other                                                               
customers are  necessary to keep costs  low and there will  be an                                                               
economic  incentive  to  expand  the scope  of  ASAP  to  include                                                               
liquefaction  and  export.   In  this  manner,  Co-Chair  Saddler                                                               
cautioned that  an in-state  project could  quickly morph  into a                                                               
project  that   could  be  substantially   similar  to   a  large                                                               
[diameter]  pipeline.     He  related   his  efforts   to  define                                                               
substantially similar, and asked DOL for guidance.                                                                              
                                                                                                                                
MR.  POAG  said  if  the  legislature wants  to  provide  to  the                                                               
administration   language   to  define   what   is   or  is   not                                                               
substantially similar  to include  in future contracts,  DOL will                                                               
research case law for a definition.                                                                                             
                                                                                                                                
9:57:10 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER   asked  Mr.  Dubler  whether   the  unanswered                                                               
question of  what is substantially  similar has an effect  on the                                                               
progress of the ASAP project.                                                                                                   
                                                                                                                                
MR. DUBLER advised that the issue  of the five-year claw back for                                                               
TransCanada gives  AGDC uncertainty in  its search for  an owner-                                                               
builder-operator for  the ASAP  project.    The  search is  for a                                                               
firm or a pipeline company -  similar to TransCanada - that would                                                               
build and  operate the project on  behalf of the state  and AGDC.                                                               
He  explained that  ASAP would  progress only  if the  Alaska LNG                                                               
Project  fails,  and if  TransCanada  has  the right  to  replace                                                               
ASAP's  designated  owner-builder-operator,  AGDC would  have  to                                                               
negotiate a  clause directing  that "we would  have to  make them                                                               
whole in the  event TransCanada comes back in  through this five-                                                               
year clawback."   He advised this contingency would  not be cheap                                                               
and  described   the  terms  of  the   five-year  provision  with                                                               
TransCanada.   Further, Mr. Dubler  addressed the  possibility of                                                               
expanding  ASAP to  a  project similar  to  one that  ExxonMobil,                                                               
ConocoPhillips,   and  BP   deem   uneconomic,   and  said   that                                                               
possibility is "kind of a naïve  position, in my opinion ....  If                                                               
the  big three  companies that  do  these projects  all over  the                                                               
world, and are very good at  it, can't make it happen, the chance                                                               
that the  State of Alaska  is going to be  able to step  in their                                                               
place and make it, is very, very slim."                                                                                         
                                                                                                                                
10:00:38 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KAWASAKI remarked to Mr. Dubler:                                                                                 
                                                                                                                                
     I think I heard you say that that while you're working                                                                     
       on the ASAP line, trying to find an owner-builder-                                                                       
      constructor, that if this bill were to pass without                                                                       
      this amendment, that somehow AGDC's mission would be                                                                      
     completely different, or maybe go away.                                                                                    
                                                                                                                                
MR. DUBLER  said no.   He clarified  that as long  as TransCanada                                                               
has  a five-year  clawback, AGDC's  negotiations  with an  owner-                                                               
builder-operator  will  require a  provision  to  pay the  owner-                                                               
build-operator off,  plus AFUDC,  in the  event they  are removed                                                               
from the project.  Further,  he cautioned that prospective owner-                                                               
builder-operator firms may  not want to take the  risk of working                                                               
on a project that they may lose.                                                                                                
                                                                                                                                
REPRESENTATIVE  KAWASAKI  questioned  whether AGDC's  ability  to                                                               
hire  a  firm  to  build  the project  is  lessened  without  the                                                               
adoption of Amendment 42.                                                                                                       
                                                                                                                                
MR. DUBLER stated:                                                                                                              
                                                                                                                                
     We've   actually   spoken   quite  a   bit   with   the                                                                    
     commissioner  of DNR  and  the  deputy commissioner  of                                                                    
     revenue  about  this and  ...  we  believe through  our                                                                    
     discussions and  the clarification  that we got  in the                                                                    
     letter from  TransCanada and  the commissioners  of DNR                                                                    
     and DOR, that it did  clear up somewhat, ... the timing                                                                    
     of  the ...  firm transportation  agreements.   And the                                                                    
     ... agreements  they've got with TransCanada  will make                                                                    
     it such that the  likelihood that this actually happens                                                                    
     is very slim, but it's a  policy call ... and that's up                                                                    
     to the legislature and the administration.                                                                                 
                                                                                                                                
10:03:38 AM                                                                                                                   
                                                                                                                                
MR.  PAWLOWSKI reminded  the  committee of  the  contents of  the                                                               
Letter  of Clarification  issued  by TransCanada.    He said  the                                                               
likelihood of the  state choosing to make  a multi-million dollar                                                               
commitment to  move through  the FEED stage  with the  Alaska LNG                                                               
Project,  while  continuing  to   progress  an  alternative  ASAP                                                               
project  is minimal.   According  to the  MOU and  the Letter  of                                                               
Clarification, the  state is fully  able to pursue  both projects                                                               
"with no hands  being bound" until 12/31/15.   Subsequently, with                                                               
the commitment  to proceed  to FEED, and  with the  execution and                                                               
ratification by the legislature  of a firm transportation service                                                               
agreement, the state's  position will be different than  it is at                                                               
this  time.    Mr.  Pawlowski  said the  purpose  of  the  90-day                                                               
termination right  to the  state, prior to  the entry  into FEED,                                                               
was  to   create  the   "exit  from   AGIA,  into   a  commercial                                                               
relationship where  the state  has a  cooling-off period  to work                                                               
together  collaboratively on  this project  going forward  in the                                                               
state's interest, while maintaining  momentum on other options as                                                               
well,  that  was  the  policy call  the  administration  made  in                                                               
advancing both of those ...."                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON acknowledged  there is  the concern  about                                                               
"tying the hands of AGDC to  go forward."  However, the condition                                                               
is  that the  projects must  be substantially  similar; thus,  if                                                               
ASAP is  not substantially similar, the  five-year provision does                                                               
not apply.   He opined the  circumstance of the state  building a                                                               
project substantially  similar is remote,  and said he is  not in                                                               
favor of changing a negotiated commercial relationship.                                                                         
                                                                                                                                
CO-CHAIR FEIGE maintained his objection.                                                                                        
                                                                                                                                
10:07:32 AM                                                                                                                   
                                                                                                                                
A roll call  vote was taken.   Representatives Kawasaki, Saddler,                                                               
P.   Wilson,  and   Tarr  voted   in  favor   of  Amendment   42.                                                               
Representatives Seaton,  Hawker, Johnson, Olson, and  Feige voted                                                               
against it.  Therefore, Amendment 42 failed by a vote of 4-5.                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER said  he is very troubled  by Amendment 42,                                                               
which could  be read many different  ways.  His negative  vote on                                                               
the amendment  was not a  reflection that he  is in favor  of the                                                               
five-year tag  provision in the  MOU; in fact, the  five-year tag                                                               
provision may be  the language that "sinks the  entire package of                                                               
legislation that these folks are asking us to pass ...."                                                                        
                                                                                                                                
REPRESENTATIVE  JOHNSON  agreed, adding  "...  and  my 'no'  vote                                                               
doesn't in any  way soften my belief that this  is the wrong path                                                               
for the State of Alaska to follow."                                                                                             
                                                                                                                                
[CSSB 138(FIN) am was held over.]                                                                                               

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