Legislature(2015 - 2016)BARNES 124

03/14/2015 01:00 PM RESOURCES

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Audio Topic
01:31:02 PM Start
01:31:46 PM HB132
02:37:55 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 3/13/15 Meeting --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 132 AGDC SUPPORT OF NATURAL GAS PROJECTS TELECONFERENCED
Moved CSHB 132(RES) Out of Committee
-- Public Testimony --
+= HB 105 AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT TELECONFERENCED
<Bill Hearing Canceled>
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 14, 2015                                                                                         
                           1:31 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative David Talerico, Co-Chair                                                                                         
Representative Mike Hawker, Vice Chair                                                                                          
Representative Bob Herron                                                                                                       
Representative Craig Johnson                                                                                                    
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Geran Tarr                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 132                                                                                                              
"An Act relating  to the support of the  Alaska liquefied natural                                                               
gas project by the Alaska Gasline Development Corporation."                                                                     
                                                                                                                                
     - MOVED CSHB 132(RES) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 105                                                                                                              
"An  Act  relating  to  the  programs and  bonds  of  the  Alaska                                                               
Industrial  Development  and  Export Authority;  related  to  the                                                               
financing   authorization    through   the    Alaska   Industrial                                                               
Development  and  Export Authority  of  a  liquefied natural  gas                                                               
production   plant   and   natural  gas   energy   projects   and                                                               
distribution systems  in the state;  amending and  repealing bond                                                               
authorizations granted  to the Alaska Industrial  Development and                                                               
Export Authority; and providing for an effective date."                                                                         
                                                                                                                                
     - BILL HEARING CANCELED                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 132                                                                                                                  
SHORT TITLE: AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                               
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
                                                                                                                                
03/02/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/02/15       (H)       RES, L&C                                                                                               
03/06/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/06/15       (H)       Heard & Held                                                                                           
03/06/15       (H)       MINUTE(RES)                                                                                            
03/11/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/11/15       (H)       Heard & Held                                                                                           
03/11/15       (H)       MINUTE(RES)                                                                                            
03/11/15       (H)       RES AT 6:00 PM BARNES 124                                                                              
03/11/15       (H)       Heard & Held                                                                                           
03/11/15       (H)       MINUTE(RES)                                                                                            
03/13/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/13/15       (H)       Scheduled but Not Heard                                                                                
03/14/15       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MERRICK PEIRCE                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
HAROLD HEINZE                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Suggested that HB 132 be amended.                                                                        
                                                                                                                                
CHARLES MCKEE                                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
RICK KOCH, City Manager                                                                                                         
City of Kenai                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 132.                                                                          
                                                                                                                                
PAT PORTER, Mayor                                                                                                               
City of Kenai                                                                                                                   
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HB 132.                                                                          
                                                                                                                                
BOYD ROCKY KNUDSEN                                                                                                              
Nikiski, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
DAVID OTNESS                                                                                                                    
Cordova, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
GEORGE PIERCE                                                                                                                   
Kasilof, Alaska                                                                                                                 
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
GEORGE SITER                                                                                                                    
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified in opposition to HB 132.                                                                       
                                                                                                                                
RON HYDE                                                                                                                        
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in relation to HB 132.                                                                         
                                                                                                                                
FELICIA KEITH-JONES                                                                                                             
High Mark Distillery, Inc.                                                                                                      
Sterling, Alaska                                                                                                                
POSITION STATEMENT:  Testified in relation to HB 132.                                                                         
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:31:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  BENJAMIN NAGEAK  called  the  House Resources  Standing                                                             
Committee meeting to order at  1:31 p.m.  Representatives Seaton,                                                               
Johnson, Josephson, Herron, Talerico,  and Nageak were present at                                                               
the  call to  order.   Representatives  Hawker,  Olson, and  Tarr                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
          HB 132-AGDC SUPPORT OF NATURAL GAS PROJECTS                                                                       
                                                                                                                                
1:31:46 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  NAGEAK announced  that the  only order  of business  is                                                               
HOUSE  BILL NO.  132,  "An Act  relating to  the  support of  the                                                               
Alaska  liquefied  natural  gas  project by  the  Alaska  Gasline                                                               
Development  Corporation."     [Before  the  committee   was  the                                                               
proposed committee substitute  (CS), labeled 29-LS0623\P, Nauman,                                                               
3/11/15, adopted as the working document on March 11, 2015.]                                                                    
                                                                                                                                
1:31:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK opened public testimony on HB 132.                                                                              
                                                                                                                                
1:32:58 PM                                                                                                                    
                                                                                                                                
MERRICK PEIRCE testified in opposition  to HB 132.  To illustrate                                                               
a point related  to competition he posed a scenario  in which the                                                               
chief executive  officer (CEO) of  Home Depot concedes  to Lowe's                                                               
the authority  to determine when,  where, and if Home  Depot ever                                                               
builds a new  store.  How many new stores  will Lowe's allow Home                                                               
Depot to  build?  The  answer is  none because a  company doesn't                                                               
turn over to its competition  the authority to determine its best                                                               
interest  and  best course  of  action.    He said  if  committee                                                               
members correctly answered this  question they would vote against                                                               
HB 132.   He said  he has tried to  imagine what would  happen if                                                               
the  president of  the United  States  had offered  this kind  of                                                               
legislation before Congress or Alaska's  governor and was limited                                                               
in what  he could do with  a pipeline project where  more than 50                                                               
percent of the  volume would be precluded from export.   He noted                                                               
that there are  lot of competing projects:   26 planned liquefied                                                               
natural gas  (LNG) projects  across the  world, another  16 under                                                               
construction,  and  27  others  currently  on-stream.    Alaska's                                                               
competition has been  keeping the state from  moving forward with                                                               
a  project.   About the  time the  Alaska Gasline  Inducement Act                                                               
(AGIA)  was  passed, Bill  Walker  was  the general  counsel  and                                                               
project  manager for  the Alaska  Gasline Port  Authority (AGPA).                                                               
Those people  paying attention to  AGIA knew  there was no  way a                                                               
large  diameter pipeline  would be  built  to the  Lower 48,  and                                                               
Exxon knew the project was  an uneconomic boondoggle.  Five years                                                               
before  AGIA  was  passed,  the  CEO  of  Exxon,  Rex  Tillerson,                                                               
acknowledged  that Exxon  knew that  that pipeline  project would                                                               
never  be built.    Bill Walker  was able  to  get some  language                                                               
inserted into the  AGIA law that required an  evaluation of going                                                               
to Valdez for an  LNG export project.  In about  2012 there was a                                                               
solicitation of interest that Exxon  was required to hold and the                                                               
port  authority was  able to  aggregate six  companies into  that                                                               
solicitation with a total aggregated  volume of about 2.8 billion                                                               
cubic feet of  gas per day, which is more  than enough to develop                                                               
a  large diameter  gasline.   Another  entity, Resources  Energy,                                                               
Inc.  (REI),  of  Japan  also  had  an  aggregated  interest  for                                                               
companies that  it represented out  of Japan and was  looking for                                                               
2.5 billion cubic  feet of gas per day.   So the total publically                                                               
disclosed interest  in this solicitation  of interest was  over 5                                                               
billion  cubic feet  of gas  per day,  more than  double what  is                                                               
needed to  get going a large  diameter gasline and more  than the                                                               
Alaska  Oil and  Gas Conservation  Commission (AOGCC)  allows for                                                               
offtake from Prudhoe  Bay.  So the market has  demonstrated it is                                                               
interested  in LNG  out of  Alaska.   Interest was  for the  deep                                                               
water, ice  free port  of Valdez,  which has  a U.S.  Coast Guard                                                               
vessel  management  tracking  system,  and  most  important,  the                                                               
markets were looking  for first gas by 2019.   The bottom line is                                                               
that HB  132 is  designed to  tie the governor's  hands and  is a                                                               
very bad idea.                                                                                                                  
                                                                                                                                
1:37:30 PM                                                                                                                    
                                                                                                                                
HAROLD HEINZE stated  he has lived in Anchorage for  more than 40                                                               
years  and  has 50  years  of  experience  in pipelines  and  oil                                                               
production  having worked  on  North Slope  gas  issues for  ARCO                                                               
Alaska and  ARCO Transportation  Company, as commissioner  of the                                                               
Department  of   Natural  Resources,   as  the   senior  resource                                                               
development advisor to Governor Hickel,  and as CEO of the Alaska                                                               
Natural  Gas Development  Authority during  three administrations                                                               
from 2003-2012.  He thanked  the committee for the opportunity to                                                               
address some  important points in the  legislature's direction of                                                               
the Alaska  Gasline Development Corporation  (AGDC).  He  said he                                                               
offered  public  comment  in  October 2013  at  the  first  board                                                               
meeting of  the newly formed  AGDC where he encouraged  the board                                                               
to:   assure that the public  is well informed of  all aspects of                                                               
utilizing Alaska natural gas; to  conduct business open enough on                                                               
a  continuing basis  that the  public  is brought  along; and  to                                                               
assure that all  alternatives are considered and  evaluated as to                                                               
the public  good impacts.  He  has followed the progress  of work                                                               
and   reviewing  available   reports   and   is  concerned   that                                                               
alternative paths and alternative  projects utilizing North Slope                                                               
gas have not been evaluated.   For the special session to be held                                                               
this  fall, an  informed public  is vital  for the  legislature's                                                               
major,  incredibly  important  decision   on  proceeding  to  the                                                               
state's  multi-billion  dollar  commitment   to  the  Alaska  LNG                                                               
Project.   The legislature is  picking the horse and  should work                                                               
hard to assure that Alaskan's  share the legislature's wisdom and                                                               
commitment.   He  suggested that  HB  132 be  amended to  include                                                               
direction  for  full  evaluation   and  publication  of  Alaska's                                                               
alternative projects  and choices.   In particular,  the decision                                                               
on  royalty-in-kind  versus   royalty-in-value  should  be  fully                                                               
vetted  and   disseminated  through  the  royalty   board  public                                                               
process.  Additionally,  HB 132 will probably be  the only Alaska                                                               
LNG Project  related legislation during this  regular session and                                                               
this  is  the best  opportunity  for  the legislature  to  direct                                                               
preparations for  the fall special  session on  state involvement                                                               
with the North  Slope producers.  This fall  the legislature will                                                               
be sitting  as the "Alaska  board of  directors" making as  big a                                                               
state fiscal decision  as he remembers since 1969.   It also will                                                               
be the riskiest  decision that the state has ever  made.  Each of                                                               
the legislature's  60 members  will be  acting individually  as a                                                               
fiduciary  and the  body must  assure  that each  member has  and                                                               
understands  the   information  he  or   she  needs  to   make  a                                                               
responsible  decision.   Legislators have  a six-month  window to                                                               
develop and  vet alternative  projects, risks,  and rewards.   He                                                               
asked that  the committee consider  HB 132 as a  positive vehicle                                                               
to  instruct and  focus the  additional information  requirements                                                               
for members and the public at large.                                                                                            
                                                                                                                                
1:41:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  requested that  the witnesses  provide their                                                               
testimony to the committee in written form.                                                                                     
                                                                                                                                
1:42:13 PM                                                                                                                    
                                                                                                                                
CHARLES  MCKEE noted  that he  testified last  year regarding  an                                                               
Alaska LNG line,  but with the caveat not  to include TransCanada                                                               
partnership because of the generation  facilities imbedded in the                                                               
Lower 48 in  TransCanada's agreement.  He said he  opposes HB 132                                                               
because of  the possibility that a  new generating infrastructure                                                               
could  be included  in which  there  is a  pressurized line  with                                                               
bypass  generation  that produces  electricity  off  of the  flow                                                               
within   the  pipeline,   which  is   called  bypass   generating                                                               
facilities.    This  electricity  could  be  re-routed  into  the                                                               
existing Railbelt  power grid infrastructure  to offset  the cost                                                               
of  electricity   in  Railbelt   communities.    This   would  be                                                               
automatically  prohibited as  the  Alaska  LNG Project  currently                                                               
stands with TransCanada.   It is being said [in  HB 132] that the                                                               
size of this  other line cannot be increased, but  it also leaves                                                               
a  window   of  opportunity  to  include   these  other  existing                                                               
technologies that are not publically controlled.                                                                                
                                                                                                                                
1:45:57 PM                                                                                                                    
                                                                                                                                
RICK KOCH, City Manager, City  of Kenai, supported HB 132, saying                                                               
it is a prudent and necessary  action to support and move forward                                                               
the long-awaited project to bring  Alaska's bounty of natural gas                                                               
to Alaskans  and to the  world's markets.   During his  career of                                                               
managing  the interest  of state  and  municipal governments  and                                                               
managing large-scale Alaska construction  projects, he has gained                                                               
an  understanding  of how  difficult  it  is to  develop  working                                                               
public/private partnerships.   As  a former  board member  of the                                                               
"Alaska   Gasline   Development   Authority"  he   commends   the                                                               
legislature  for   recognizing  and  addressing   those  inherent                                                               
difficulties  in  the  enabling  legislation  which  created  the                                                               
Alaska Gasline Development Corporation.   He said HB 132 provides                                                               
for safeguards in which the state  can move forward in a mutually                                                               
supportive  relationship with  the  major  North Slope  producers                                                               
while  still protecting  the state's  interest in  an alternative                                                               
project in  the event that the  Alaska LNG Project does  not come                                                               
to fruition.   Years  of effort  have been  expended to  create a                                                               
framework of trust  and cooperation not unduly  influenced by the                                                               
political whims  of the  next election.   This framework  must be                                                               
protected by  not introducing opposing  interest and  distrust to                                                               
the project.   In the event  that the Alaska LNG  Project decides                                                               
not  to pursue  construction  of a  large  diameter gasline,  the                                                               
state  at that  time will  have every  opportunity to  modify the                                                               
scope of the Alaska Stand  Alone Pipeline (ASAP) Project with the                                                               
benefit   of  feasibility,   engineering,  and   permitting  data                                                               
developed by  the Alaska LNG Project  and the ASAP Project.   The                                                               
Alaska LNG Project  and the ASAP Project,  as presently developed                                                               
and further defined  by HB 132, are Alaska's  best opportunity to                                                               
realize  the long-time  goal  of developing  the  natural gas  on                                                               
Alaska's North Slope.                                                                                                           
                                                                                                                                
1:48:34 PM                                                                                                                    
                                                                                                                                
PAT PORTER, Mayor, City of  Kenai, stated that the present Alaska                                                               
LNG  Project, the  ASAP Project,  and HB  132 establish  the best                                                               
opportunity to bring North Slope  gas reserves to the citizens of                                                               
Alaska  and  to  world  markets, specifically  the  Pacific  Rim.                                                               
Successful   megaprojects  require   decision  making   based  on                                                               
extremely  complicated and  dynamic  issues, such  as the  future                                                               
demand  and  market  forces,  not   on  political  issues.    The                                                               
legislature  recognized  this  in  the formation  of  the  Alaska                                                               
Gasline  Development  [Corporation]  (AGDC)  and  HB  132  simply                                                               
reinforces  this  process that  has  successfully  moved the  two                                                               
projects  forward.   The  Kenai community  looks  forward to  the                                                               
projects.   Any successful project or  business endeavor requires                                                               
that  partnerships  demand trust  and  common  goals and  HB  132                                                               
simply memorializes those critical understandings.                                                                              
                                                                                                                                
1:50:01 PM                                                                                                                    
                                                                                                                                
BOYD ROCKY  KNUDSEN expressed his  opposition to HB 132  and said                                                               
that if the state  is going to have a backup plan  it should be a                                                               
viable backup plan.                                                                                                             
                                                                                                                                
1:50:49 PM                                                                                                                    
                                                                                                                                
DAVID  OTNESS said  he sees  many things  about HB  132 that  are                                                               
shutting off the free flow  of information and direction that the                                                               
state should be  going.  During his 64 years  of living in Alaska                                                               
he has  been involved in  oil company work, exploration,  and the                                                               
Merchant Marine  working out of  Prudhoe Bay and Cook  Inlet, and                                                               
he sees a  lot of holes in  the bill.  He said  he questions some                                                               
of its  merits based on  just the tides  in Cook Inlet  alone and                                                               
especially  at  Nikiski, given  that  LNG  tankers are  100  feet                                                               
larger  than U.S.  aircraft  carriers and  are  20 stories  high.                                                               
Safely moving  such tankers around  Cook Inlet is his  number one                                                               
issue  in  terms  of  the   route.    The  [previous]  route  was                                                               
established by  voter approval in  2002.  The years  between 2003                                                               
and  2012 were  invested in  the Alaska  Natural Gas  Development                                                               
Authority (ANGDA)  and now suddenly that  isn't worth considering                                                               
relative to changing  horses again.  He said  he is flabbergasted                                                               
by  the way  this thing  is  being railroaded  and is  definitely                                                               
opposed to HB 132.                                                                                                              
                                                                                                                                
1:53:02 PM                                                                                                                    
                                                                                                                                
GEORGE  PIERCE stated  he is  against HB  132, saying  it doesn't                                                               
move anything forward but rather ties  the hands of Alaska and is                                                               
bad  for Alaskans.   Competition  is needed  to ensure  the state                                                               
gets a  pipeline.   He asked why  committee members  don't demand                                                               
answers from  the oil companies like  they do of Mr.  Dan Fauske,                                                               
and added  that the oil  companies are not the  state's partners.                                                               
There have been  five pipeline proposals over the  last ten years                                                               
with no results.   The current governor wants to  get a guarantee                                                               
on a pipeline  and represent Alaskans.  The person  to talk to is                                                               
AGDC  [president] Dan  Fauske.   He recalled  Mr. Fauske  stating                                                               
that the  AGDC board has directed  him to come back  to the board                                                               
on  April 9  [2015] with  an estimate  as to  what work  and cost                                                               
would be  involved.  The AGDC  board asked Mr. Fauske  to look at                                                               
an  American National  Standards Institute  (ANSI) 600  pipe with                                                               
added compression as well as an  ANSI 900 which would be stronger                                                               
steel  for more  compression.   No LNG  configuration is  made in                                                               
this estimate.  What changed was  three members of the AGDC board                                                               
and the  board wants  to analyze  real data.   If the  AGDC board                                                               
decides not to go forward with  an LNG project, the state will be                                                               
without a  backup, he  said, and  he agrees  with the  AGDC board                                                               
about having  a for-sure plan  rather than  to have nothing.   He                                                               
reiterated his opposition to HB 132,  saying it is a bad piece of                                                               
legislation.                                                                                                                    
                                                                                                                                
1:56:32 PM                                                                                                                    
                                                                                                                                
GEORGE SITER stated he is a  20-year resident of Alaska, a Korean                                                               
War veteran, a retired police  officer, and a Republican since he                                                               
was eight  years old.   He  charged that  the Republicans  in the                                                               
Alaska State Legislature  are acting like the Mafia  to far left.                                                               
He  said  Bill  Walker  was elected  [governor]  by  the  average                                                               
citizen to get the best deal  on LNG, with Alaska being the prime                                                               
beneficiary.  Governor Walker also  promised to get it done after                                                               
the legislature has  done nothing for over 30 years.   He said he                                                               
considers what legislators are doing  as either a payoff from the                                                               
producers  or as  being out  to ambush  Governor Walker.   It  is                                                               
absurd to have a pipeline  that cannot produce money from foreign                                                               
people to  help pay for the  gas and pay for  everything else and                                                               
instead  puts the  whole burden  on the  people of  Alaska.   Had                                                               
legislators spent  more time working  for Alaskans,  the pipeline                                                               
would  have been  operating years  ago.   Instead the  Republican                                                               
leadership has given the state a  mountain of debt, $10 million a                                                               
day, and  legislators should be  ashamed of themselves.   He said                                                               
HB 132 is unintelligible and  sponsored by traitors to Alaska and                                                               
he is opposed to it.                                                                                                            
                                                                                                                                
1:58:20 PM                                                                                                                    
                                                                                                                                
RON HYDE said he  grew up in Bush Alaska and  has spent nearly 30                                                               
years in the Bush  trying to make a living.   A business owner on                                                               
the Kenai Peninsula,  he said he is fully committed  to a gasline                                                               
for Alaska.   In particular, he is very supportive  of the Alaska                                                               
LNG Project and  as such he is not interested  in going backwards                                                               
another 30  years and contemplating  a bunch  of new ideas.   The                                                               
Alaska LNG  Project is  currently predicted  to come  directly to                                                               
Nikiski as  was promised in Governor  Walker's Kenai inauguration                                                               
speech, but  that seems to have  changed in the weeks  after that                                                               
celebration.    There  is  a lot  of  potential  future  economic                                                               
activity that  will transform [the  Kenai] region and  the region                                                               
has a lot to gain.  He has  a lot invested already in the oil and                                                               
gas  industry in  Alaska, having  worked directly  and indirectly                                                               
with  companies  that   produce  oil  and  gas.     He  has  been                                                               
responsible  for hiring  several hundred  people and  hundreds of                                                               
vendors  and   subcontractors,  which  created   another  several                                                               
hundred jobs  for Alaskans.   Point  Thomson is  an example  of a                                                               
project that created  hundreds of millions of  dollars for Alaska                                                               
in revenue  to Alaskans.   In  particular it will  be one  of the                                                               
cornerstones of  the future of this  gasline and it gave  him the                                                               
opportunity  to hire  the workforce  that he  has hired  over the                                                               
years.   It seems  to take disasters  to bring  Alaskans together                                                               
and  disasters create  economic uncertainty,  test human  spirit,                                                               
change qualities  of life,  and can  cause communities  to become                                                               
stagnant and destitute for years.   The governor's flip flopping,                                                               
broken commitments,  and suggestion to cheat  on Alaskan citizens                                                               
and business  partners with a  competing gasline will  derail the                                                               
work  that has  been done,  the hundreds  of millions  of dollars                                                               
that have  been spent, and  the momentum  that is in  place right                                                               
now to give Alaska a gasline  today, and he is embarrassed by it.                                                               
Project certainty is one thing  that these companies look at when                                                               
trying to decide what to do with  a project and how to take it to                                                               
the  shareholders.   In this  case the  State of  Alaska has  not                                                               
demonstrated to  him that  there is  project certainty  in making                                                               
ASAP  bigger  and  taking  another  10-30 years  to  make  it  be                                                               
whatever Governor  Walker wants it to  be.  Right now  there is a                                                               
project that if the state acts  as an ethical partner will gain a                                                               
gasline for  Alaskans in the  foreseeable years.   Uncertainty is                                                               
being  created through  the  voice of  Governor  Walker and  this                                                               
needs  to be  looked  at if  Alaska is  to  attract business  and                                                               
investment.                                                                                                                     
                                                                                                                                
2:03:34 PM                                                                                                                    
                                                                                                                                
FELICIA  KEITH-JONES, High  Mark  Distillery,  Inc., offered  her                                                               
support of  the Alaska LNG  gas pipeline.   She said she  is very                                                               
interested  in getting  clarity as  to whether  the project  will                                                               
continue forward or  has come to a standstill.   This pipeline is                                                               
very important to  her small community, and  local businesses are                                                               
in  limbo  as  to  whether  to expand  to  accommodate  a  larger                                                               
population  or  to  button  down the  hatches.    Her  distillery                                                               
depends completely on the population  to be a viable industry and                                                               
also drives  a large tourist  revenue and the distillery  is able                                                               
to  produce that  revenue only  if it  knows where  the community                                                               
stands.   She  personally  has rental  properties and  investment                                                               
real  estate and  doesn't  know whether  she  should continue  to                                                               
improve and grow that  or make sure she is safe  and secure.  She                                                               
said  she wants  to know  which way  to grow  and that  she wants                                                               
clarity  from  the governor.    She  reiterated her  support  for                                                               
continuing the Alaska LNG pipeline in her community.                                                                            
                                                                                                                                
The committee took an at-ease from 2:06 p.m. to 2:07 p.m.                                                                       
                                                                                                                                
2:07:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK closed public testimony.                                                                                        
                                                                                                                                
2:08:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TALERICO   moved  to  report  the   proposed  committee                                                               
substitute  (CS), Version  29-LS0623\P, Nauman,  3/11/15, out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOSEPHSON objected for purposes of discussion.                                                                   
                                                                                                                                
2:08:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  noted that  in a previous  committee he                                                               
said he liked Senate Bill 138  and he continues to like that bill                                                               
and is proud  to have voted for  it.  Even before  he was elected                                                               
everybody seemed  to be in  favor of a  large gasline and  he has                                                               
never heard anyone opposed to it.   He related that when he asked                                                               
about why  the limits of  no more export available  than [Alaska]                                                               
consumes, about  240 million  cubic feet, he  found the  answer a                                                               
little dubious  and it seemed  a bit arbitrary for  a demarcation                                                               
about what  ASAP should be  allowed to  produce.  He  noted there                                                               
were  23 committee  hearings on  House  Bill 4  and in  reviewing                                                               
those minutes he didn't see  anything that precluded what AGDC is                                                               
doing  in  making a  pivot.    He said  he  thinks  House Bill  4                                                               
anticipated and  even invited  this adjustment.   In  the minutes                                                               
there  was often  the  comment  that if  the  cap  of the  Alaska                                                               
Gasline Inducement  Act (AGIA) was  lifted then all  systems were                                                               
go and  this could go  just about in  any direction.   He related                                                               
that when he  asked Mr. Richards and Mr. Fauske  [of AGDC] if any                                                               
statute or previous  agreement like the Heads  of Agreement (HOA)                                                               
or  Memorandum of  Understanding (MOU)  precluded what  they were                                                               
doing  the  answer   was  no.    And  no  one   at  the  hearing,                                                               
particularly yesterday,  provided a  response that  indicated Mr.                                                               
Richards or Mr. Fauske were  incorrect and that somehow what they                                                               
were doing is precluded from some existing law or agreement.                                                                    
                                                                                                                                
2:10:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON continued,  saying he remains personally                                                               
protective of  and invested in Senate  Bill 138.  He  offered his                                                               
agreement  that it  is the  furthest along  the stage-gated  path                                                               
that Alaska has  come on a gasline.  The  comment about a slowing                                                               
of  the environmental  impact statement  (EIS)  process made  him                                                               
anxious because  he doesn't think  Alaska can afford a  whole lot                                                               
of pauses.   On  the other hand,  he said he  has read  and heard                                                               
countless times that  no more than half of these  plans will ever                                                               
be developed.   When Mr. [Larry] Persily  was sending legislators                                                               
the progress  of the worldwide  LNG market,  he took it  that Mr.                                                               
Persily was educating  legislators as well as  advising them that                                                               
this is  a competitive world.   Having  some options is  wise and                                                               
gives  the state  more leverage  with its  North Slope  leasehold                                                               
allies.   Many negotiations remain  to be done and  anything that                                                               
would  strengthen  the  state's  bargaining  position  should  be                                                               
encouraged.  The  industry has not given  any specific indication                                                               
that  anything the  governor  has proposed  or  is proposing  has                                                               
given  the industry  particular reservations.   The  governor did                                                               
run on a platform different  than the previous governor's in many                                                               
respects,  including  how the  state  develops  and produces  gas                                                               
fields, so  none of  the governor's position  is surprising.   If                                                               
the administration  had proposed  a pure  defense of  Senate Bill                                                               
138, all in with no strings  or adjustments, that would have been                                                               
newsworthy.    During  House  Bill   4  testimony  it  was  heard                                                               
repeatedly  that  a single  year's  delay  would cost  the  small                                                               
gasline  $200 million  in inflation.    Arguably, that  statement                                                               
could be used  in just about any direction.   However, he said he                                                               
thinks  the same,  if it  applies  here, would  suggest that  the                                                               
state needs  to have  a legitimate alternative.   He  offered his                                                               
hope that in about 18 months  this matter will become moot and it                                                               
will  be known  whether Exxon,  Conoco,  and BP  are prepared  to                                                               
enter into the front-end engineering  and design (FEED) phase and                                                               
at that  point people will  be investing  in the low  billions of                                                               
dollars.   That  would  be  a strong  sign  that  the Alaska  LNG                                                               
Project is  moving forward and  may truly happen, but  until that                                                               
time the state needs some options.                                                                                              
                                                                                                                                
2:13:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HAWKER  concurred   that   everything  said   by                                                               
Representative Josephson  is solidly grounded in  fact.  However,                                                               
he  continued, what  might  be  at issue  is  how  the facts  are                                                               
interpreted and  amalgamated into  the larger construct  of where                                                               
things are at and where they are  going.  There is a long history                                                               
behind  getting  to  where  things   are  today  with  developing                                                               
Alaska's North Slope  natural gas.  This effort  began about five                                                               
or  six  years ago  with  House  Bill  369 when  the  legislature                                                               
originally  directed the  Alaska Housing  Finance Corporation  to                                                               
create the AGDC  subsidiary and embark upon  developing a project                                                               
plan for  getting Alaska's gas  into the  hands of Alaskans.   At                                                               
the time  most everyone recognized  that the AGIA effort  was not                                                               
going  to succeed.   House  Bill 369  gave way  to House  Bill 9,                                                               
which was  the first effort  to create a stand-alone  gas company                                                               
and House  Bill 4  succeeded in  doing it -  it was  crafted into                                                               
House Bill 4 that should the  AGIA limitation go away the project                                                               
could morph into  something larger.  House Bill 4  even gave AGDC                                                               
the authority to  be Alaska's gasline company  to pursue whatever                                                               
project gained  the most viability  and was able to  move forward                                                               
while the state  always had in its back pocket  the pipe that has                                                               
become called ASAP.                                                                                                             
                                                                                                                                
2:15:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HAWKER  continued,   recalling  that   with  the                                                               
vagaries at  the time  industry didn't know  where it  was going,                                                               
there  was  no big  project,  the  Lower  48 project  had  gotten                                                               
stymied, but the state had  that backup project.  The legislature                                                               
said that if the state has to, the  state will do it alone.  Then                                                               
came Senate Bill 138 last year,  which was a big decision because                                                               
it was  where the horse to  ride was chosen.   The choice between                                                               
projects was  made last year,  so that is not  before legislators                                                               
today.    Through  Senate  Bill 138,  the  legislature  chose  to                                                               
endorse  and throw  the entire  weight  of the  state behind  the                                                               
concepts,  mechanisms, and  financing  encompassed  in the  bill.                                                               
The state is  in fact moving forward with the  big project and HB                                                               
132 is about  continuing to move forward and  not going backward.                                                               
It is about maintaining that  momentum in the most cost-effective                                                               
manner possible.   He agreed that the state still  has its backup                                                               
project.  If  that big project falters, the state  has created an                                                               
entity  in AGDC  and  money is  sitting there  and  all of  those                                                               
resources will immediately be redirected  in grabbing that backup                                                               
project and it will go forward full  speed.  He said HB 132 keeps                                                               
the  state  from riding  two  horses  at  once by  going  forward                                                               
simultaneously and  thereby creating  a competing project  out of                                                               
the  backup  project.    He   said  it  is  the  "backup  project                                                               
protection act"  to ensure money is  there when it is  needed and                                                               
ensuring the  backup project is  ready to go.   The intent  of HB                                                               
132 is to  keep momentum going with the big  project, to preserve                                                               
and  protect the  backup  project,  and to  ensure  the money  is                                                               
sitting there should it be needed.                                                                                              
                                                                                                                                
2:18:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  said some of  her concerns have  been raised                                                               
already.  She  agreed that not having the  AGIA constraints gives                                                               
an  opportunity to  reconsider and  have that  flexibility.   She                                                               
said what she finds striking is  that the state hasn't heard from                                                               
any of its  industry partners in either support  or opposition of                                                               
HB 132, which  makes her wonder if  they see that there  may be a                                                               
new opportunity  without the constraints  of AGIA.   The proposal                                                               
presented to  the committee  yesterday by  Mr. Fauske  gives AGDC                                                               
three  and  a half  weeks  given  that  the information  will  be                                                               
presented  at the  April 9  AGDC  meeting.   The most  concerning                                                               
thing she heard  yesterday was the pause in the  EIS work because                                                               
no delay is  wanted, although, three and a half  weeks is a short                                                               
amount  of time  to  see  what information  is  brought back  and                                                               
whether it  can be crossed  off or is  an even better  option for                                                               
the state.   The legislature  will still  be in session  and will                                                               
have the  opportunity to  make a decision  at that  time, perhaps                                                               
armed with  new information about another  opportunity that might                                                               
be even better.                                                                                                                 
                                                                                                                                
2:20:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  said  he  thinks that  when  the  initial                                                               
projects  were being  constructed  to go  forward  with ASAP  and                                                               
AGDC,  everyone  recognized  that  the constraint  was  always  a                                                               
pipeline  of 500  million cubic  feet a  day and  the development                                                               
going forward was designed on that.   Regarding the idea that the                                                               
backup project  is ready to  go, he said he  is not sure  that is                                                               
the case if it  is going to be said that  the only backup project                                                               
is  the project  for  500  million cubic  feet  per  day, and  he                                                               
doesn't know  where the state  is at  on that section  of things.                                                               
What bothers  him somewhat  is that  the legislature  has created                                                               
AGDC with an independent board  and an independent function to go                                                               
forward to  do actions for  the state, but  now it is  being said                                                               
that  the new  configuration of  the AGDC  board and  the board's                                                               
decision are disliked  and so the legislature is going  to pass a                                                               
law  to override  the  board's  decision.   That  is because  Mr.                                                               
Fauske came before  the committee and said he  had been requested                                                               
by the  board to explore  these two  other options and  with this                                                               
bill  [the legislature]  is  saying  no he  won't  for a  certain                                                               
period of time.                                                                                                                 
                                                                                                                                
2:22:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON continued, stating  that the certain period                                                               
of time  gives him  some comfort.   He  said he  is in  a dilemma                                                               
because  he doesn't  want to  see a  competing project  interfere                                                               
with the  progress being  made on  the Alaska  LNG Project  and a                                                               
dilemma  as to  how far  into  this independent  agency does  the                                                               
legislature go  to tell AGDC  that the legislature is  making the                                                               
decisions now  instead of the  board.   It is a  balancing issue.                                                               
He said he is not going to ask  to delay the bill, but he doesn't                                                               
think anything is clear cut one  way or another.  He doesn't want                                                               
the state's partners in the Alaska  LNG Project to think that the                                                               
state  is jumping  ship because  he doesn't  think exploring  the                                                               
option  of what  would  the backup  be at  a  larger diameter  or                                                               
throughput capacity is jumping ship;  rather, it is better tuning                                                               
the backup in case a final  investment decision is not reached to                                                               
go  forward with  the Alaska  LNG  Project.   He said  he is  not                                                               
entirely convinced  the bill is  needed, but he doesn't  think it                                                               
is going  to be  a big impediment.   He added  that he  wants the                                                               
committee to  know he  is unsure  of where things  are and  he is                                                               
considering both sides of the issue.                                                                                            
                                                                                                                                
2:24:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON opined  that Senate Bill 138  was passed by                                                               
the legislature and signed by the  executive branch, so it is the                                                               
policy.   The new governor  could have introduced a  bill stating                                                               
what the  governor wants.   He said  he finds that  troubling and                                                               
that is  why he  is one  of the sponsors  of HB  132, which  is a                                                               
reaction,  through legislation,  to  create a  policy related  to                                                               
this  matter.   It  bothers  him that  the  executive branch,  by                                                               
verbal  edict,  wants  to  go  in a  different  direction.    The                                                               
legislature is having  this dialogue and debate in  a public way,                                                               
the  legislature should  decide what  is important.   He  said he                                                               
supports moving HB 132 out  of committee and to another committee                                                               
regardless of all these other timelines.   If the [AGDC] wants to                                                               
make its  decision as an  independent body,  so be it.   However,                                                               
the legislature  should not sit  on this legislative  process and                                                               
let the other branch do it by verbal edict.                                                                                     
                                                                                                                                
2:27:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON stated  he  is troubled  by  a couple  of                                                               
things.  The  EIS being put on  hold raises a red  flag, it shows                                                               
the federal  government clearly  sees a  competing project.   The                                                               
governor's  language that  it is  a race  to the  finish line  is                                                               
concerning because that shows competition.   In regard to waiting                                                               
until April  9, he  pointed out  that this date  is only  10 days                                                               
before the  end of  session.   In regard to  the analogy  of Home                                                               
Depot  and Lowe's,  he  said  he thinks  the  new hardware  store                                                               
moving next to  Lowe's is a Lowe's.  The  state is competing with                                                               
itself and neither Lowe's nor Home  Depot would do that.  He said                                                               
he hasn't  seen anything  yet from  AGDC, the  administration, or                                                               
the producers that  says this is a  good idea.  He  said he would                                                               
like to  move HB  132 and  get it  positioned to  be moved  on if                                                               
necessary as stalling the bill would be a tragedy.                                                                              
                                                                                                                                
2:28:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  said his biggest concern  is the governor's                                                               
aversion to put  out his own bills and  testifying his positions.                                                               
The governor can talk about his  position but until it is seen in                                                               
writing the  legislature is  second-guessing what  the governor's                                                               
intentions are.   As the  session progresses, perhaps  more bills                                                               
will be  seen that  outline the direction  the governor  wants to                                                               
go.   The public  is being  precluded from  any testimony  on the                                                               
governor's  views,  the  public  only  gets  to  testify  on  the                                                               
legislature's views.  [A bill from  the governor] would make it a                                                               
much clearer process.                                                                                                           
                                                                                                                                
2:29:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON maintained  his objection  to reporting                                                               
HB 132,  Version P, out of  committee.  He stated  that Mr. Steve                                                               
Butt,  the  manager for  the  Alaska  LNG Project  secunded  from                                                               
Exxon, has  been very impressive.   He said he has  thought about                                                               
Mr. Butt because nothing that he  has heard about Senate Bill 138                                                               
has moved one inch.  In other  words, there has been no "well, we                                                               
said  that then  but  now  we mean  something  different" and  he                                                               
therefore thinks the  plan has some credibility  because of that.                                                               
Representative Josephson  further commented that while  it's true                                                               
the  governor wants  to look  at options,  the governor  has also                                                               
said that  Senate Bill 138 needs  to process and progress  in the                                                               
way it has.                                                                                                                     
                                                                                                                                
2:30:36 PM                                                                                                                    
                                                                                                                                
A  roll call  vote was  taken.   Representatives Herron,  Hawker,                                                               
Johnson, Olson,  Seaton, Talerico, and  Nageak voted in  favor of                                                               
reporting   the  proposed   committee  substitute,   Version  29-                                                               
LS0623\P, Nauman,  3/11/15.   Representatives Josephson  and Tarr                                                               
voted against it.   Therefore, CSHB 132(RES) was  reported out of                                                               
the House Resources Standing Committee by a vote of 7-2.                                                                        
                                                                                                                                
The committee took an at-ease from 2:31 p.m. to 2:35 p.m.                                                                       
                                                                                                                                
2:35:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON  requested  a verbatim  transcript  of  the                                                               
committee's 3/13/15 meeting.                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK thanked the witnesses for testifying on HB 132.                                                                 
                                                                                                                                
2:37:55 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:38 p.m.                                                                 

Document Name Date/Time Subjects
3.11.15 HRES CSHB 132 - Version P.pdf HRES 3/14/2015 1:00:00 PM
HB 132
3.11.15 HRES CSHB 132 Summary of Changes CS version P.pdf HRES 3/14/2015 1:00:00 PM
HB 132
HB 132 HRES LOS - M Prax.pdf HRES 3/14/2015 1:00:00 PM
HB 132
HB 132 HRES L Willis Testimony 3.6.15.pdf HRES 3/14/2015 1:00:00 PM
HB 132
3.14.15 HRES HB 132 A LeMaster Ltr of opposition.pdf HRES 3/14/2015 1:00:00 PM
HB 132
3.6.15 HRES HB 132 - H Heinze comments 3.17.15.pdf HRES 3/14/2015 1:00:00 PM
HB 132
3.14.15 HRES HB 132 - The Alliance - Letter of Support.pdf HRES 3/14/2015 1:00:00 PM
HB 132