Legislature(2015 - 2016)JNUCAP124

04/08/2015 02:05 PM RESOURCES

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02:05:44 PM Start
02:06:14 PM HB105
04:07:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
         HB 105-AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT                                                                     
2:06:14 PM                                                                                                                    
CO-CHAIR TALERICO announced  that the first order  of business is                                                               
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." [Before                                                               
the committee was CSHB 105(ENE).]                                                                                               
2:06:44 PM                                                                                                                    
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 1,  labeled 29-                                                               
GH1019\H.9, Shutts, 4/7/15, which read:                                                                                         
     Page 1, line 2:                                                                                                            
          Delete "related"                                                                                                    
          Insert    "requiring    the   Alaska    Industrial                                                                  
       Development and Export Authority to deliver to the                                                                     
      legislature reports relating to the Interior energy                                                                     
     project; relating"                                                                                                       
     Page 5, following line 14:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "*  Sec.  8. The  uncodified  law  of the  State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          REPORT. (a) The Alaska Industrial Development and                                                                     
     Export   Authority  shall   submit  quarterly   to  the                                                                    
     legislature  a written  report on  the Interior  energy                                                                    
     project. The authority shall deliver  the report to the                                                                    
     senate secretary  and the chief  clerk of the  house of                                                                    
     representatives  and notify  the  legislature that  the                                                                    
     report is available. The report must include                                                                               
               (1) a description of project progress on all                                                                     
               (2) an update on the status of local                                                                             
     distribution infrastructure buildout;                                                                                      
               (3) to-date and anticipated conversions; and                                                                     
               (4)  a financial accounting of funds                                                                             
     expended and  funds anticipated to be  spent, including                                                                    
     loans, grants, and bonds.                                                                                                  
          (b)  If requested, the Alaska Industrial                                                                              
     Development  and  Export   Authority  shall  provide  a                                                                    
     project briefing on the Interior  energy project to the                                                                    
     Legislative Budget and Audit Committee."                                                                                   
     Renumber the following bill section accordingly.                                                                           
REPRESENTATIVE TARR objected for purposes of discussion.                                                                        
2:07:02 PM                                                                                                                    
REPRESENTATIVE HAWKER  first provided  an explanation for  all of                                                               
the amendments that he will be  offering.  He assured members and                                                               
the public that  he stands behind the  commitment the legislature                                                               
made  over the  recent  years to  dedicate  efforts to  providing                                                               
energy  cost  relief to  the  people  of  Interior Alaska.    The                                                               
legislature  has made  this issue  a priority  and has  dedicated                                                               
substantial financial  resources to it,  and it is a  good public                                                               
policy  that the  legislature needs  to stay  with.   Legislative                                                               
bills are proposals of policy  and bills draw policy boxes around                                                               
things.  A  bill is introduced so it can  be discussed publically                                                               
in a  manner that allows  thinking about it and  its consequences                                                               
and legislators  can decide whether it  is a policy to  be taken.                                                               
The Interior Energy  Project (IEP), [with its  goal of] providing                                                               
energy cost  relief to the  citizens of Interior Alaska,  is very                                                               
complicated.   The state's  commitment of  several years  ago has                                                               
apparently  been determined  unworkable and  now legislators  are                                                               
looking at redefining  that commitment and how  to manifest that.                                                               
His personal policy in approaching  these sorts of things is that                                                               
the legislature's job is to draw  a box around the policy that it                                                               
wants;  the legislature  provides  the parameters  around how  it                                                               
wishes the  policy to be developed  and executed.  He  said he is                                                               
very concerned that  legislators do not micromanage  what goes on                                                               
inside  that box  as it  generally  has unintended  consequences.                                                               
The  amendments he  is offering  are about  defining that  policy                                                               
box, not micromanaging within that  box, legislators are charging                                                               
the agency with figuring out what  goes on inside the box.  These                                                               
"do no harm amendments" define  the parameters, the borders, that                                                               
legislators  want the  Alaska Industrial  Development and  Export                                                               
Authority  (AIDEA)  and  the Interior  Energy  Project  (IEP)  to                                                               
operate within.                                                                                                                 
2:10:46 PM                                                                                                                    
REPRESENTATIVE HAWKER  addressed Amendment 1, saying  it is about                                                               
preserving  the  legislature's  power   of  appropriation.    The                                                               
legislature's ultimate authority is to  make the policy calls and                                                               
to commit the  state's financial resources, he said.   But before                                                               
doing  that the  legislature  needs  to know  what  it is  buying                                                               
before writing  those checks, and  the legislature needs  to know                                                               
how many more  checks will need to be written  before the project                                                               
is over.  To that end  Amendment 1 adds a legislative sanctioning                                                               
requirement  before  AIDEA  can  access  the  sustainable  energy                                                               
transmission and supply  development (SETS) bonding authorization                                                               
that  was provided  previously to  the North  Slope gas  trucking                                                               
project and the bonding authorization that remains in HB 105.                                                                   
The committee took an at-ease from 2:11 p.m. to 2:12 p.m.                                                                       
REPRESENTATIVE HAWKER  continued addressing Amendment  1, stating                                                               
it is about good governance  by requiring that the project submit                                                               
quarterly  reports to  the  legislature on  the  progress of  the                                                               
project, including an ongoing financial  accounting.  It provides                                                               
specific  authority   for  the   Legislative  Budget   and  Audit                                                               
Committee to  request and  hold hearings  as necessary  to review                                                               
the project's  progress so the  legislature can exercise  its due                                                               
diligence in monitoring the project.                                                                                            
2:13:12 PM                                                                                                                    
REPRESENTATIVE SEATON observed that  the explanatory notes in the                                                               
committee packet  state that  Amendment 1 paves  the way  for the                                                               
Legislative  Budget  and  Audit  Committee to  hold  hearings  as                                                               
necessary to review  AIDEA's progress.  He  further observed that                                                               
page 1, lines  9-21, of Amendment 1 provide for  the reporting to                                                               
the  Legislative  Budget  and  Audit  Committee.    He  said  the                                                               
amendment language  does not  appear to  give that  committee the                                                               
authority  to change  anything, but  such authority  seems to  be                                                               
implied in the wording that describes the amendment.                                                                            
REPRESENTATIVE HAWKER read  page 1, lines 19-21,  of Amendment 1:                                                               
"(b) If  requested, the Alaska Industrial  Development and Export                                                               
Authority  shall  provide  a project  briefing  on  the  Interior                                                               
energy project  to the Legislative  Budget and  Audit Committee."                                                               
He said that language is all there is, there is no more.                                                                        
REPRESENTATIVE SEATON  requested that  the sponsor  of HB  105 be                                                               
able to come forward to talk to the proposed amendment.                                                                         
FRED  PARADY, Deputy  Commissioner, Office  of the  Commissioner,                                                               
Department   of  Commerce,   Community  &   Economic  Development                                                               
(DCCED),  replied  that  Amendment  1  is  straight  forward  and                                                               
continues the  ongoing and vital  communication that  {AIDEA] has                                                               
been having  with the  legislature and this  committee, so  it is                                                               
2:15:48 PM                                                                                                                    
REPRESENTATIVE  TARR observed  that in  the amendments  the words                                                               
"energy  project" are  not capitalized  in  the phrase  "Interior                                                               
energy project".  She surmised this  could be interpreted to be a                                                               
little  broader than  a specific  project.   For example,  in the                                                               
PowerPoint  presentation  before  the   committee  it  was  named                                                               
"Interior Energy  Project" as  if it  is a  specific thing.   She                                                               
asked whether this is something that matters or is of concern.                                                                  
GENE  THERRIAULT, Energy  Policy  and  Outreach Director,  Alaska                                                               
Energy Authority (AEA), Alaska  Industrial Development and Export                                                               
Authority (AIDEA),  Department of Commerce, Community  & Economic                                                               
Development (DCCED),  responded he  doesn't think  so, especially                                                               
because this  is intent  language and is  not written  right into                                                               
the  codified  section  of  the statute.    The  Interior  Energy                                                               
Project, while focused  on that core demand  within the Fairbanks                                                               
North  Star Borough  (FNSB),  was always  intended  to serve  the                                                               
larger geographic area  of Interior Alaska.   Until the economics                                                               
work on  that core demand, however,  it is going to  be that much                                                               
more challenging to serve any of  the communities up and down the                                                               
highway system or on the  river system because they move together                                                               
as one.   First,  that core demand  justifies the  very expensive                                                               
infrastructure, and  then working  the economics  so that  it can                                                               
spread beyond the Fairbanks North Star Borough.                                                                                 
2:17:22 PM                                                                                                                    
REPRESENTATIVE TARR removed her objection  to Amendment 1.  There                                                               
being no further objection, Amendment 1 was adopted.                                                                            
2:17:40 PM                                                                                                                    
CO-CHAIR  TALERICO  moved  to  adopt  Amendment  2,  labeled  29-                                                               
GH1019\H.5, Shutts, 4/4/15, which read:                                                                                         
     Page 1, following line 7:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Section 1. The uncodified law of the State of                                                                    
     Alaska is amended by adding a new section to read:                                                                         
          LEGISLATIVE INTENT. It is the intent of the                                                                           
     legislature that the financing authorized in sec. 6 of                                                                     
     this Act be used only for the Interior energy project                                                                      
     described in sec. 6 of this Act."                                                                                          
     Page 1, line 8:                                                                                                            
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
     Renumber the following bill sections accordingly.                                                                          
REPRESENTATIVE HAWKER objected for purposes of explanation.                                                                     
2:17:54 PM                                                                                                                    
CO-CHAIR TALERICO explained  that his intent with  Amendment 2 is                                                               
to "have a very clear definition  in Section 6 of absolutely what                                                               
this legislation  intends for us  to do."   Amendment 2  makes it                                                               
very clear to AIDEA and to  this committee "exactly what we would                                                               
be doing with this legislation."                                                                                                
REPRESENTATIVE HAWKER removed his objection to Amendment 2.                                                                     
2:18:31 PM                                                                                                                    
REPRESENTATIVE  SEATON objected  to Amendment  2 for  purposes of                                                               
discussion.   He  requested  the sponsor  of  the legislation  to                                                               
address the amendment.                                                                                                          
MR. THERRIAULT queried  whether Amendment 2 should  say Section 5                                                               
instead  of  Section 6,  pointing  out  that  Section 6  in  bill                                                               
version  29-GH1019\H,  which  came   out  of  the  House  Special                                                               
Committee   on  Energy,   deals  with   a  partially   used  bond                                                               
RENA DELBRIDGE,  Staff, Representative Mike Hawker,  Alaska State                                                               
Legislature,  offered  her belief  that  Amendment  2 is  drafted                                                               
correctly  because, first,  a  new Section  1  is being  inserted                                                               
which then  renumbers all  of the  other sections,  and therefore                                                               
Section 5 of 29-GH1019\H becomes Section 6 in Amendment 2.                                                                      
JULIE MORRIS, Staff, Representative  David Talerico, Alaska State                                                               
Legislature, added that it was semantics.                                                                                       
MR. THERRIAULT,  given the explanation  and that Amendment  1 was                                                               
adopted, agreed that Amendment 2 is drafted correctly.                                                                          
REPRESENTATIVE HAWKER  clarified that Amendment 1  had no effect,                                                               
each amendment  stands on its own.   He said it  is the inserting                                                               
of a new  bill section in Amendment 2 that  causes the shift from                                                               
Section 5 to Section 6.                                                                                                         
MR. PARADY  noted there is no  intent to use the  tools of Senate                                                               
Bill  23  [passed  in  2013 by  the  Twenty-Eighth  Alaska  State                                                               
Legislature] for  a project  other than the  IEP; Amendment  2 is                                                               
straight forward.                                                                                                               
2:21:14 PM                                                                                                                    
REPRESENTATIVE  SEATON  removed  his objection  to  Amendment  2.                                                               
There being no further objection, Amendment 2 was adopted.                                                                      
2:21:45 PM                                                                                                                    
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 3,  labeled 29-                                                               
GH1019\H.7, Shutts, 4/7/15, which read:                                                                                         
     Page 1, following line 7:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Section 1. AS 42.05.711(b) is amended to read:                                                                   
          (b)  Except as otherwise provided in this                                                                             
     subsection  and   in  (o)   of  this   section,  public                                                                    
     utilities   owned   and   operated   by   a   political                                                                    
     subdivision  of   the  state,  or   electric  operating                                                                    
     entities established  as the instrumentality of  two or                                                                    
     more public  utilities owned and operated  by political                                                                    
     subdivisions  of  the  state,   are  exempt  from  this                                                                    
     chapter,  other  than   AS 42.05.221  -  42.05.281  and                                                                    
     42.05.385. However,                                                                                                        
               (1)  the governing body of a political                                                                           
     subdivision may  elect to be  subject to  this chapter;                                                                    
               (2)  a utility or electric operating entity                                                                      
     that is  owned and operated by  a political subdivision                                                                    
     and  that directly  competes  with  another utility  or                                                                    
     electric operating  entity is  subject to  this chapter                                                                    
     and  any other  utility  or  electric operating  entity                                                                    
     owned  and operated  by  the  political subdivision  is                                                                    
     also subject  to this chapter; this  paragraph does not                                                                    
     apply to  a utility or electric  operating entity owned                                                                    
     and operated  by a political subdivision  that competes                                                                    
     with a telecommunications utility; and                                                                                 
               (3) a natural gas distribution system and                                                                    
     affiliated infrastructure that  provides natural gas to                                                                
     Interior  Alaska  and  receives financing  through  the                                                                
     Alaska  Industrial  Development  and  Export  Authority                                                                
     sustainable energy transmission  and supply development                                                                
     fund (AS 44.88.660) is subject to this chapter."                                                                       
REPRESENTATIVE TARR objected.                                                                                                   
2:21:52 PM                                                                                                                    
REPRESENTATIVE HAWKER  stated Amendment  3 is an  amendment about                                                               
consumer  protection.    It specifically  subjects  the  Interior                                                               
Energy   Project  to   rate  regulation   under  the   Regulatory                                                               
Commission  of Alaska  (RCA).   He explained  this is  being done                                                               
because  both  AIDEA  and  the Interior  Gas  Utility  (IGU)  are                                                               
political  subdivisions  of the  state  and,  as such,  would  be                                                               
automatically exempt  from rate  regulation without  Amendment 3.                                                               
Alaska  has  a provision  in  law  that generally  exempts  these                                                               
political subdivision entities from  rate regulation because when                                                               
the public has  an issue with a publically-owned entity  - say, a                                                               
utility managed by a city council -  the public can take it up at                                                               
the next  election by replacing  the city  council.  That  is how                                                               
consumers can  weigh in and  protect themselves from  a political                                                               
management standpoint.   However,  this very  complicated project                                                               
is incredibly confusing  and the outcome is very  uncertain.  The                                                               
RCA  is  a  quasi-judicial   deliberative  body  responsible  for                                                               
weighing  the facts  and  ensuring that  the  public is  properly                                                               
protected.   Currently involved in  this Interior  Energy Project                                                               
is a  letter of  intent from AIDEA  to acquire  Fairbanks Natural                                                               
Gas (FNG).   Testimony from  AIDEA is  that it doesn't  intend to                                                               
become  a  gas  company,  but  will transfer  that  off  to  IGU.                                                               
However, there  is no  letter of  intent with IGU  so as  to know                                                               
what that  is going  to look  like or  how it  is going  to work.                                                               
[The legislature]  is affecting the  lives of all  those citizens                                                               
in Fairbanks  and North Pole who  are going to be  dependent upon                                                               
these utilities.   If AIDEA  hands FNG off  to IGU it  is unknown                                                               
what the  terms and costs  will be,  what the cost  recovery will                                                               
require, and what burden will be placed on the ratepayers.                                                                      
2:24:57 PM                                                                                                                    
REPRESENTATIVE HAWKER  continued addressing Amendment  3, stating                                                               
it is  unknown who will  be operating the  utility.  What  if the                                                               
transaction falls  through and AIDEA  ends up owning  the utility                                                               
and it is going  to be run by the State of Alaska?   What are the                                                               
intentions  of  AIDEA  going  to  be  and  what  is  the  state's                                                               
experience and  qualifications to  run a  public utility?   These                                                               
questions  need to  be  answered  in the  process  of making  the                                                               
Interior Energy  Project real.   However, the magnitude  of these                                                               
questions and  the uncertainty  warrants the  absolute protection                                                               
of the  ratepayer that  could be  provided by  the quasi-judicial                                                               
oversight of  the RCA.   These utility customers cannot  weigh in                                                               
and  un-elect the  folks at  AIDEA like  they can  do with  their                                                               
local utility.   Additionally, IGU is going to serve  a number of                                                               
different  political subdivisions  of  the state,  so  it is  not                                                               
going to be a situation  where a particular subdivision can weigh                                                               
in and  influence the  management of IGU  should this  project be                                                               
handed off to  IGU.  This consumer protection  oversight from the                                                               
RCA is  to protect ratepayers.   The mission of  these particular                                                               
utilities, through a  very complicated section of the  law, is to                                                               
ensure that  the rates  charged to those  customers are  just and                                                               
reasonable.   That  is  why there  is  the RCA  and  why the  RCA                                                               
regulates most of the large  utilities around the state.  Because                                                               
IGU is a  brand new utility the operator is  unknown and there is                                                               
no cash  flow, so IGU must  incur debt for every  bit of buildout                                                               
that it has.   The customers who are going to  be affected by all                                                               
of these very uncertain items  need to have a protective umbrella                                                               
to  ensure  the  greatest   possible  protection  government  can                                                               
provide.   Government is doing  its best  to step in  and provide                                                               
the energy project  on one side of  the coin, and it  must not be                                                               
forgotten that this is going to  affect the lives of real people.                                                               
In the  effort to get  less expensive gas  to those folks,  it is                                                               
not  wanted to  actually end  up  costing those  folks more  than                                                               
they've  got now.    Therefore, he  has  the greatest  confidence                                                               
that, at this time, imposing  RCA rate regulation on the Interior                                                               
Energy  Project is  in  the  best interest  of  the consumers  in                                                               
Fairbanks and legislators as policy makers.                                                                                     
2:28:44 PM                                                                                                                    
REPRESENTATIVE SEATON requested Mr. Robert  Pickett of the RCA to                                                               
address the aforementioned.                                                                                                     
ROBERT  PICKETT, Commissioner,  Regulatory  Commission of  Alaska                                                               
(RCA), Department  of Commerce, Community &  Economic Development                                                               
(DCCED), stated  the RCA has  not taken a  position on HB  105 or                                                               
any of the amendments at this point.                                                                                            
REPRESENTATIVE  SEATON  inquired  how  RCA's  regulation  of  the                                                               
Interior  Energy  Project,  AIDEA  or a  state-owned  entity,  or                                                               
another entity  would work, and  what the timeframes would  be in                                                               
those regulatory matters.                                                                                                       
MR.  PICKETT answered  the  RCA does  not  regulate the  Interior                                                               
Energy  Project, it  regulates certificated  utilities.   At this                                                               
point in time in Fairbanks  there is Fairbanks Natural Gas (FNG),                                                               
which has been  certificated since the mid-1990s.   More recently                                                               
there is  the Interior  Gas Utility  (IGU) -  it was  a contested                                                               
proceeding that was concluded in December  2013.  He said he must                                                               
be somewhat cautious  at this point because the RCA  has two open                                                               
docketed  matters with  Fairbanks Natural  Gas which  is becoming                                                               
economically  regulated for  the first  time.   There is  an open                                                               
docket with a procedural schedule  and a discovery in process and                                                               
there  is  a  liquefied  natural  gas  (LNG)  purchase  agreement                                                               
between Harvest  and Fairbanks Natural  Gas.   He said this  is a                                                               
policy  question for  the  legislature to  make.   The  RCA is  a                                                               
creation of the legislature through  AS 42.05.06 and 42.05.08 and                                                               
the RCA will do whatever it is directed.                                                                                        
REPRESENTATIVE  SEATON   understood,  then,   that  the   RCA  is                                                               
currently  regulating or  has dockets  on regulation  of the  two                                                               
MR. PICKETT corrected  Representative Seaton's statement, stating                                                               
the RCA  has two  dockets on  one of the  utilities.   During its                                                               
certification  proceedings, IGU  had  a list  of  things that  it                                                               
wanted attached to  its certificate, one of which was  to be rate                                                               
regulated.  The  RCA pointed IGU to AS 42.05.711(b)  and the fact                                                               
that as  a municipally-owned utility IGU  would specifically have                                                               
to petition  the RCA to  be rate regulated.   In its  final order                                                               
the RCA indicated  that IGU would need to file  a tariff with the                                                               
RCA no  later than  April 1,  2015, to  meet IGU's  schedule, but                                                               
that did not happen.  So,  at this point, IGU is not economically                                                               
2:31:56 PM                                                                                                                    
REPRESENTATIVE  SEATON  asked about  the  timetable  and how  the                                                               
distribution of natural gas would  be affected and handled if the                                                               
utility  is not  yet economically  regulated and  Amendment 3  is                                                               
MR. PICKETT  replied that the  utility, once it decides  it needs                                                               
to be  rate regulated, will have  to make a filing  with the RCA.                                                               
He said it  is very challenging when starting a  new utility from                                                               
the ground up.  There are  always concerns about a small customer                                                               
base, large capital  expenditure, and how to work that  out so it                                                               
doesn't become too burdensome for  individual ratepayers who sign                                                               
up early.   There are different  mechanisms to use.   One case in                                                               
point is Goat  Lake Hydro in Southeast Alaska, which  in the late                                                               
1990s created essentially  a rate stabilization fund.   Given the                                                               
number of  customers and the  amount of capital  expenditures for                                                               
the dam,  things needed to  be stretched out until  everybody was                                                               
on  line and  so  it  wouldn't present  huge  rate  shock to  the                                                               
ratepayers.   The ball is  going to be in  the courts of  the IEP                                                               
and IGU as far as what their buildout  plan is and what kind of a                                                               
case they can present.                                                                                                          
REPRESENTATIVE  SEATON recalled  that  [in  a previous  committee                                                               
meeting]  AIDEA  talked  about  a 40-year  payback  on  the  pipe                                                               
distribution system,  whereas Homer  had a  10-year payback.   He                                                               
inquired whether that fits in with the RCA's guidelines.                                                                        
MR. PICKETT  responded he  doesn't see that  as an  issue because                                                               
different utilities have  different debt structures.   Any of the                                                               
bigger utilities  will probably have 10-15  different tranches of                                                               
debt, all at different terms and  interest rates and some as long                                                               
as 30 years.                                                                                                                    
2:34:48 PM                                                                                                                    
REPRESENTATIVE TARR, in  regard to whether this would  in fact be                                                               
a consumer  protection measure, asked whether  the opposite could                                                               
be true  based on the financing  and that it could  result in the                                                               
earlier ratepayers  paying more  because there  would be  so many                                                               
expenses for  the early  part of the  project and  those expenses                                                               
not being spread out more evenly.                                                                                               
MR. PICKETT  answered that is  what he  was referring to  when he                                                               
mentioned a rate  stabilization fund.  In some  fashion the rates                                                               
for  the  people who  sign  up  early are  going  to  need to  be                                                               
stabilized either  through some  AIDEA mechanism and  through the                                                               
loan  proceeds, or  through  some  formalized rate  stabilization                                                               
fund in  the case of  an entity that  has a capital  structure of                                                               
100 percent coming from the proceeds.   It would just be how long                                                               
to stretch  that out,  what amount,  and whether  the projections                                                               
for  the buildout  are realistic  since people  will not  sign up                                                               
2:36:15 PM                                                                                                                    
REPRESENTATIVE  OLSON   inquired  whether  there  has   been  any                                                               
dialogue  between the  board of  the  Alaska Gasline  Development                                                               
Corporation  (AGDC) and  the RCA  commissioners,  or possibly  an                                                               
open  docket  regarding  whether  the RCA  would  have  potential                                                               
jurisdiction over [IGU].                                                                                                        
MR.  PICKETT  replied  the RCA  doesn't  have  jurisdiction  over                                                               
Interior gas  at this point.   The statute  is clear on  that and                                                               
[IGU]  has  made  no  election  to  have  the  RCA  exercise  any                                                               
jurisdiction.    That  was  somewhat   different  than  what  the                                                               
representations  were during  the contested  hearing, but  that's                                                               
certainly within  the right of  IGU and the Fairbanks  North Star                                                               
REPRESENTATIVE  OLSON clarified  his question  was whether  there                                                               
was any dialogue  between the RCA commissioners  and AGDC's board                                                               
on that issue.                                                                                                                  
MR. PICKETT answered no, not that he is aware of.                                                                               
2:37:23 PM                                                                                                                    
MR.  PARADY voiced  his concerns  with Amendment  3, saying  that                                                               
they rest  in the good faith  that everyone has while  working to                                                               
make this project  work.  It is found in  the existing statute on                                                               
line 9 of Amendment 3, which  states:  "(1) the governing body of                                                               
a  political  subdivision  may  elect   to  be  subject  to  this                                                               
chapter".  The  Fairbanks North Star Borough (FNSB)  is the owner                                                               
of  the Interior  Gas Utility  (IGU) and  [FNSB] has  the ability                                                               
under existing  statute to seek rate  regulation if it is  in the                                                               
best interest of its taxpayers  and citizens.  The aforementioned                                                               
RCA docket  was adjudicated on  December 20, 2013, and  it states                                                               
specifically that  the governing body of  a political subdivision                                                               
may subject  itself to  regulation under AS  42.05.   The statute                                                               
states that  an election to be  subject to AS 42.05  must be made                                                               
by  the  governing body  of  the  subdivision.   In  the  current                                                               
instance the governing  body is the FNSB Assembly.   No ordinance                                                               
has been  passed by  FNSB, therefore under  the operation  of the                                                               
statute  IGU is  exempt from  regulation at  this point  in time.                                                               
The reason  that is worth  considering is that  state legislative                                                               
protection  is  being offered  to  local  government who  already                                                               
holds  the power  to provide  that protection  within its  hands.                                                               
The maker  of the  amendment opened his  comment noting  that the                                                               
political subdivision retains the  ability to control its utility                                                               
rates.   That remains true  - [FNSB]  has the ability  to control                                                               
IGU.   He offered  his belief that  government governs  best that                                                               
governs closest  to the problem  at hand.   He said  his concerns                                                               
with  the   amendment  are  that   it  treats  the   natural  gas                                                               
distribution system  in Fairbanks North Star  Borough differently                                                               
than the rest of the  state because that statutory provision that                                                               
provides  for the  local borough  assembly to  elect this  option                                                               
exists, and exists  today, and will still exist  into the future.                                                               
A complicated regulatory process through  the RCA is being added,                                                               
when  in the  startup  of  this utility  there  is  the issue  of                                                               
patient  capital, low  number of  customers,  and long-term  high                                                               
capital costs at  the beginning, and this would  put that through                                                               
another  filter  with  the  RCA when  local  government  is  well                                                               
positioned  to handle  it.   The  request for  RCA regulation  is                                                               
within the  authority of  the existing  statute and  the existing                                                               
authority  of  the Fairbanks  North  Star  Borough Assembly,  and                                                               
therefore the question  that has been raised is  addressed in the                                                               
current configuration.                                                                                                          
2:40:05 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked how  Senate Bill 23, passed nearly                                                               
unanimously  in  2013,  treated this  question  of  the  trucking                                                               
REPRESENTATIVE HAWKER  recollected that it simply  authorized the                                                               
investment in that project.  Since  it was never the subject of a                                                               
full legislative process where policy  is proposed in legislation                                                               
such as  this it was never  fully vetted, and the  Senate Bill 23                                                               
amendment was  silent on that  matter.   Senate Bill 23  also did                                                               
not  contemplate the  state,  through a  state  agency, owning  a                                                               
public utility as in AIDEA owning a company like FNG.                                                                           
2:41:16 PM                                                                                                                    
REPRESENTATIVE  SEATON stated  he is  somewhat disturbed  by this                                                               
because  the legislature  has been  trying to  get a  gas project                                                               
going on  a fairly  rapid basis  to supply  the Interior.   Given                                                               
what  was heard  from the  RCA as  well as  the complexity,  this                                                               
could put a  big damper on being able to  move forward because it                                                               
would require  some kind  of a  [sinking] fund  or some  means to                                                               
assure  ratepayers that  they are  not going  to be  artificially                                                               
paying more early on due to  the utility having 100 percent debt.                                                               
He said  he doesn't understand  this process well and  needs more                                                               
information  from  Fairbanks and  others  as  to how  they  could                                                               
structure  this to  work and  not delay  the project.   Injecting                                                               
another  entity into  the  middle,  he said,  may  not serve  the                                                               
legislature's purpose  of trying  to accelerate  more reasonable-                                                               
cost energy to the Interior.                                                                                                    
CO-CHAIR  TALERICO inquired  whether  Mr. Pickett  has a  comment                                                               
regarding the aforementioned.                                                                                                   
MR. PICKETT answered that, in some  fashion, there is going to be                                                               
some mechanism to mitigate rate  shock, whether that be through a                                                               
fund  that is  originally funded  through loan  proceeds or  some                                                               
mechanism that AIDEA,  in the absence of any  RCA involvement, is                                                               
going to have to figure out.                                                                                                    
2:43:56 PM                                                                                                                    
REPRESENTATIVE  TARR,   regarding  a  rate   stabilization  fund,                                                               
surmised that that would only be  if Amendment 3 went through and                                                               
that it would be a mechanism used through RCA regulation.                                                                       
MR. PICKETT  replied it  would be a  potential mechanism  to look                                                               
at.  The RCA  would look at the entire package  and how AIDEA has                                                               
structured the financing deal and what is and is not feasible.                                                                  
REPRESENTATIVE  TARR asked  whether the  possibility exists  that                                                               
that would be  disallowed, that the process would get  to a point                                                               
where the RCA would say no  to that because the financing was too                                                               
long term  or not enough people  or some other factor  that would                                                               
should show not enough stability.                                                                                               
MR. PICKETT  responded the RCA  "has already made its  finding in                                                               
terms of the CPC and in  terms of fit, willingness, and ability."                                                               
A big  part of that was  the commitment the legislature  had made                                                               
through [Senate  Bill 23]  and also  the representations  made by                                                               
the Fairbanks  North Star Borough that  at the end of  the day it                                                               
realizes  it is  the owner  of the  utility and  will do  what it                                                               
needs  to do  to make  this a  success.   Obviously, AIDEA  has a                                                               
disproportionate influence on this because  it is going to be the                                                               
funding  source  and  is  going  to lay  out  the  terms  of  the                                                               
financing, when it is supposed to  be paid back, and what portion                                                               
may be  soft or not  as soft.  Therefore,  AIDEA will be  a major                                                               
driver in this whole thing, regardless  of which way it goes with                                                               
the regulatory part.                                                                                                            
2:45:42 PM                                                                                                                    
REPRESENTATIVE SEATON said these are  all interwoven parts and he                                                               
is unsure  about how  complicated this  would get  if legislative                                                               
approval is required  before AIDEA can offer that  and also along                                                               
with the RCA's involvement.                                                                                                     
MR. PICKETT answered that as  indicated by Representative Hawker,                                                               
it seems like legislators want  to set the general parameters and                                                               
give  the maximum  flexibility to  AIDEA  to make  sure this  can                                                               
MR.  PARADY  noted that  adding  the  RCA  to  the process  in  a                                                               
mandatory way - currently it's  an elective way - adds regulatory                                                               
complexity.   As was  noted in the  introduction to  Amendment 3,                                                               
the  RCA is  itself a  quasi-judicial  body and  the handling  of                                                               
filings and  cases before  that body can,  in and  of themselves,                                                               
cost a substantial  sum of money.  It is  not uncommon for filing                                                               
processes to take $1 million to work their way through.                                                                         
2:47:13 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked  whether  a  rate  stabilization                                                               
fund, like  the one used  in the  upper Lynn Canal  [of Southeast                                                               
Alaska], is  within the  power of  the RCA  to establish  now, or                                                               
whether it is something that this bill should address.                                                                          
MR. PICKETT replied he is not  sure the bill should address that.                                                               
He  explained  the  Alaska  Power   Company  established  a  rate                                                               
stabilization fund in  the late 1990s for a fixed  period of time                                                               
to mitigate  rate shock as  the Goat  Lake Hydro project  came on                                                               
line with submarine cables for Haines and Skagway.                                                                              
2:47:53 PM                                                                                                                    
REPRESENTATIVE HAWKER  provided closing  remarks on  Amendment 3.                                                               
He said  today's dialogue points out  to him how essential  it is                                                               
that  the legislature  provide the  consumer  protection for  the                                                               
individuals who  will end  up one  day having  to pay  rates from                                                               
this  project.   Rate regulation  in this  case provides  nothing                                                               
more   than  protections   of  Alaska's   citizens  against   bad                                                               
management  practices,   ill-advised  management   practices,  or                                                               
simply mistakes on behalf of  a dominant entity that is providing                                                               
the  funding,  managing  the process,  literally  going  out  and                                                               
purchasing components of  it that are going to be  assembled by a                                                               
single  state  agency.    He  said  he  is  not  so  sure  he  is                                                               
comfortable  with  a  monopolistic  state  agency  involved  here                                                               
without some sort  of a protective umbrella for  the citizens who                                                               
will be  affected.   The committee has  heard that  initially IGU                                                               
wanted to  be rate regulated  but then discovered it  didn't have                                                               
to  file so  it didn't.   The  committee has  heard that  the LNG                                                               
purchase agreement  that AIDEA is currently  undertaking with its                                                               
purchase  of the  FNG distribution  system is  itself before  the                                                               
RCA, challenged  by the attorney  general of the State  of Alaska                                                               
for fear  it will  result in monopolistic  control of  the supply                                                               
and  distribution of  energy and  requires an  anti-trust review.                                                               
That is  why there is the  RCA to protect people.   The committee                                                               
has also heard  that FNG has an application in  process to become                                                               
rate regulated  for the first time.   During his 13  years in the                                                               
legislature,  he  related,  he  has  heard  complaints  from  FNG                                                               
consumers about  what they felt were  predatory pricing practices                                                               
by  that entity.    Those  consumers have  been  asking for  rate                                                               
regulation to  protect themselves.   There was a  judicial agency                                                               
that looked to see if those costs were just and reasonable.                                                                     
2:50:15 PM                                                                                                                    
REPRESENTATIVE HAWKER continued, stating  no one is being treated                                                               
differently here.   This outside umbrella  agency is specifically                                                               
wanted  to  protect   those  people.    There   is  no  assurance                                                               
whatsoever that AIDEA  is going to engineer  a rate stabilization                                                               
agreement to  protect customers.   It is  known that  the initial                                                               
customers at  FNG are going to  be paying $15 per  thousand cubic                                                               
feet (MCF)  of gas at  city gate  if the transaction  to purchase                                                               
Pentex  Alaska Natural  Gas  Company, LLC,  goes  through.   [The                                                               
committee] has  been told  that it  is unacceptable  for anything                                                               
less  than $15  at  the  burner tip  for  everybody  else in  the                                                               
community  with   this  AIDEA  buildout  continuing.     That  is                                                               
discriminatory  and is  why the  RCA is  needed to  protect those                                                               
initial consumers against an unfair  practice that is perpetrated                                                               
unintentionally  upon them.   Consumers  who come  into the  game                                                               
later  get cheaper  gas with  all the  state subsidies  involved,                                                               
while at  the same  time the  state is  locking in  those earlier                                                               
customers to  more expensive gas.   Whether or not  a complicated                                                               
process is wanted, this is hugely  complicated, and that is why a                                                               
judicial agency  is needed  that can sort  out these  details and                                                               
ensure that  the decisions ultimately  are in the  best interests                                                               
of those consumers.   He urged the committee members  to join him                                                               
in passing Amendment 3.                                                                                                         
The committee took an at-ease from 2:51 p.m. to 2:59 p.m.                                                                       
2:59:46 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON recognized the  committee is pressed and                                                               
has a lot to  do between today and the end  of session, but asked                                                               
whether  the  co-chair is  willing  to  invite the  testimony  of                                                               
either  the City  of Fairbanks  or the  borough mayor  so members                                                               
could hear their perspective on this.                                                                                           
REPRESENTATIVE  TALERICO  replied he  doesn't  think  it wise  to                                                               
delay working through  the amendments.  He noted  that the mayors                                                               
of the  City of  Fairbanks and the  Fairbanks North  Star Borough                                                               
are present.   Responding to  Representative Hawker,  he returned                                                               
to addressing Amendment 3 and  asked whether the objection to the                                                               
amendment was still maintained.                                                                                                 
REPRESENTATIVE SEATON maintained his objection to Amendment 3.                                                                  
3:01:02 PM                                                                                                                    
A  roll call  vote was  taken.   Representatives Herron,  Hawker,                                                               
Johnson, Olson, Nageak, and Talerico  voted in favor of Amendment                                                               
3.   Representatives  Josephson, Tarr,  and Seaton  voted against                                                               
it.  Therefore, Amendment 3 was adopted by a vote of 6-3.                                                                       
3:02:02 PM                                                                                                                    
REPRESENTATIVE  SEATON moved  to adopt  Amendment 4,  labeled 29-                                                               
GH1019\H.6, Shutts, 4/6/15, which read:                                                                                         
     Page 2, line 17:                                                                                                           
          Delete "law"                                                                                                          
          Insert "the legislature [LAW]"                                                                                    
     Page 4, lines 16 - 24:                                                                                                     
          Delete all material and insert:                                                                                       
        "* Sec. 4. AS 44.88.900(16) is amended to read:                                                                     
               (16)  "qualified energy development" means a                                                                     
     development in the state that involves                                                                                     
               (A)  transmission, generation, conservation,                                                                     
     storage, or distribution of heat or electricity;                                                                           
               (B)         liquefaction,     regasification,                                                                    
     distribution, storage, or use  of natural gas, propane,                                                                
     or  propane  and  air mixture;  in  this  subparagraph,                                                                
     "distribution" does not include  [EXCEPT] a natural gas                                                                
     pipeline project for transporting  natural gas from the                                                                    
     North  Slope  or  Cook  Inlet   to  market  unless  the                                                                
     pipeline  has  a diameter  of  12  inches or  less  and                                                                
     transports the natural gas to Interior Alaska;                                                                         
               (C)  distribution or storage of refined                                                                          
     petroleum products;"                                                                                                       
     Page 5, line 2:                                                                                                            
          Following "Alaska":                                                                                               
          Insert "as a primary market"                                                                                      
          Following "gas":                                                                                                      
          Insert "delivery and"                                                                                             
     Page 5, line 12, following "Section":                                                                                      
          Insert "2, ch. 27, SLA 1993, as amended by sec.                                                                       
     19, ch. 111, SLA 1996; sec."                                                                                               
REPRESENTATIVE HAWKER objected for purposes of discussion.                                                                      
3:02:11 PM                                                                                                                    
REPRESENTATIVE SEATON  explained the  committee has  been talking                                                               
about allowing  options to  look at  the Interior  Energy Project                                                               
and  one of  those is  gas  from Cook  Inlet.   There  is a  high                                                               
probability, he said, that gas  through a small diameter pipeline                                                               
from Cook Inlet to Fairbanks  would be cheaper, especially in the                                                               
long  term,  than liquefying  the  natural  gas and  trucking  or                                                               
railing it  to Fairbanks,  and he  wants to  ensure there  is the                                                               
ability to look at  that.  He drew attention to  page 1, line 13,                                                               
of Amendment 4, which states:   "natural gas, propane, or propane                                                           
and air mixture".  He said  the reason for the propane or propane                                                           
and  air mixture  language is  that petroleum  economists at  the                                                               
University  of  Alaska  Fairbanks  have presented  to  the  House                                                               
Community and Regional Affairs Standing  Committee that a propane                                                               
hydro train  coming out  of Prince  Rupert could  deliver propane                                                               
cheaper  than  LNG  and  possibly  cheaper  than  a  natural  gas                                                               
pipeline.   A March  24 [2015] editorial  in the  Fairbanks Daily                                                             
News  Miner talks  about $12  per  thousand cubic  feet (MCF)  of                                                             
natural gas  at the North Pole  terminal, which is $16  at burner                                                               
tip  and therefore  within  range  and should  be  evaluated.   A                                                               
propane and  air mixture is  used in  regular gas lines  with the                                                               
natural gas  burner tips, so  switching back and forth  between a                                                               
propane  and air  mixture and  natural  gas can  be done  without                                                               
having to  do any modifications.   The big thing with  propane is                                                               
the  ability to  supply  cheaper energy  to customers  throughout                                                               
Interior Alaska where  the population density is  not high enough                                                               
to support building a pipeline  system.  Amendment 4 would ensure                                                               
that the Interior  Energy Project is not just  limiting itself to                                                               
one way to  lower the economics of heat energy  to Alaska.  Plus,                                                               
[propane] can be burned in generators.                                                                                          
CO-CHAIR TALERICO invited the administration to comment.                                                                        
MR. PARADY  stated Amendment 4 incorporates  changes already seen                                                               
in the  Senate.  Adding  alternatives such as propane  is useful,                                                               
he said, so the amendment is appreciated.                                                                                       
3:06:06 PM                                                                                                                    
REPRESENTATIVE  HAWKER removed  his  objection.   There being  no                                                               
further objection, Amendment 4 was adopted.                                                                                     
3:06:22 PM                                                                                                                    
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 5,  labeled 29-                                                               
GH1019\H.8, Shutts, 4/6/15, which read:                                                                                         
     Page 4, following line 15:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 4. AS 44.88.170(a) is amended to read:                                                                      
          (a)  Except as provided in (c) of this section,                                                                   
     nothing   [NOTHING]  in   this  chapter   prevents  the                                                                
     inclusion in a  lease or other agreement  relating to a                                                                    
     project of  a provision granting the  right to purchase                                                                    
     the  project,  or  to  renew or  extend  the  lease  or                                                                    
     agreement, upon  the terms and conditions  which may be                                                                    
     provided for in the lease or agreement.                                                                                    
        * Sec.  5. AS 44.88.170 is  amended by adding  a new                                                                  
     subsection to read:                                                                                                        
          (c) Unless the authority has obtained legislative                                                                     
     approval,  the authority  may not  purchase or  acquire                                                                    
     gas  reserves  or  a  gas lease  or  become  a  working                                                                    
     interest owner of a natural gas lease."                                                                                    
     Renumber the following bill sections accordingly.                                                                          
REPRESENTATIVE TARR objected.                                                                                                   
3:06:31 PM                                                                                                                    
REPRESENTATIVE HAWKER  said Amendment 5 is  about the legislature                                                               
making a policy call that says "we  do not wish AIDEA to become a                                                               
state-owned  oil and  gas company."   Amendment  5 would  require                                                               
legislative approval to  be granted before AIDEA  can purchase or                                                               
acquire  natural gas  reserves  or leases,  or  become a  working                                                               
interest owner  of a natural  gas lease.  Specifically,  it would                                                               
amend  AS  44.88.170,  a  catchall  section  in  the  authorizing                                                               
statutes  related to  AIDEA's purchase  of projects  and entering                                                               
into various  leases, and  oil and gas  leasing is  essentially a                                                               
leasing activity.   The legislative  legal drafters  thought this                                                               
the best  section to place this.   The reason for  requiring this                                                               
legislative approval  is that  legislators have  heard repeatedly                                                               
over the  past several months  about folks in  the administration                                                               
talking with energy  producing companies in the  Cook Inlet about                                                               
acquiring  their gas  reserves  in the  ground  and asking  those                                                               
entities  about becoming  a working  interest owner  in order  to                                                               
establish a gas supply for the  Interior Energy Project.  Some of                                                               
this has  gone on without  the knowledge  of the folks  at AIDEA;                                                               
two different sides of the  administrative government are working                                                               
on the same  project but not necessarily in  coordination.  Maybe                                                               
it is  a good thing  for IEP to  acquire working interest  in the                                                               
Cook Inlet,  he allowed, but the  committee ought to be  making a                                                               
policy  call today  that requires  legislative  permission to  do                                                               
that.    It would  be  a  wholesale  change  of state  policy  to                                                               
establish an  essentially state-owned oil  and gas company.   The                                                               
legislature would not want to enter  into that level of change in                                                               
its philosophy of managing the  state's resources without a great                                                               
deal of separate deliberation and consideration.                                                                                
3:09:20 PM                                                                                                                    
REPRESENTATIVE HAWKER  continued his explanation of  Amendment 5,                                                               
noting  that three  Interior utilities  are actively  involved in                                                               
this:   Golden Valley Electric  Association (GVEA),  Interior Gas                                                               
Utility  (IGU), and  Fairbanks Natural  Gas  (FNG), and  possibly                                                               
AIDEA.    Nothing in  Amendment  5  and  nothing in  the  statute                                                               
prohibits those entities  from working or banding  together to do                                                               
collaborative  buying   and  to   negotiate  the   best  possible                                                               
agreements, just like  all the other utilities in  the state that                                                               
have to  procure gas from  the Cook Inlet through  negotiation in                                                               
the  open  market.    Those   utilities  include  Homer  Electric                                                               
Association,  Inc. and  ENSTAR Natural  Gas Company,  the company                                                               
that he represents.  He said he  isn't sure it is a good idea for                                                               
the  legislature to  allow  the  state, with  its  heavy hand  of                                                               
regulation and  ability to  punish entities that  do not  do what                                                               
the state tells  them to do, to  be able to compete  on behalf of                                                               
certain utilities against the other  utilities of the state.  The                                                               
state moving  into ownership of  oil and  gas leases in  the Cook                                                               
Inlet,  and bringing  to bear  its regulatory  authorities, could                                                               
threaten  the stability  of  what is  currently  a very  delicate                                                               
market.   Two  years ago  there was  not enough  gas in  the Cook                                                               
Inlet for anything,  and while it now appears that  there is more                                                               
gas,  care must  be taken  with letting  the state  weigh in  too                                                               
hard.   He urged that  the committee  provide the policy  box for                                                               
the folks at  AIDEA that says the legislature  would prefer AIDEA                                                               
not  be a  state-owned oil  company  until it  brings a  specific                                                               
proposal to the legislature for specific review and evaluation.                                                                 
3:11:52 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON inquired  whether AIDEA  hasn't already                                                               
been involved with the legislature's  say-so in the Mustang field                                                               
in terms of  backing reserves there and  using AIDEA's collateral                                                               
for that purpose.                                                                                                               
REPRESENTATIVE  HAWKER  replied AIDEA  has,  as  directed by  the                                                               
legislature, provided  financial incentives  to help  the private                                                               
sector develop  its own activities, including  AIDEA's support of                                                               
Furie Operating Alaska,  LLC, in the Cook Inlet.   However, it is                                                               
different in that the state  is providing the support for private                                                               
sector  development  as opposed  to  the  state stepping  in  and                                                               
owning  the resource  itself and  becoming  a direct  part of  an                                                               
exploration and production activity.                                                                                            
REPRESENTATIVE JOSEPHSON responded by saying, "like AGDC is."                                                                   
REPRESENTATIVE HAWKER answered AGDC  has absolutely nothing to do                                                               
with being an exploration and production company.                                                                               
REPRESENTATIVE JOSEPHSON  understood that, but said  it is direct                                                               
ownership share by a state agency.                                                                                              
REPRESENTATIVE HAWKER responded not of the natural resource.                                                                    
3:13:27 PM                                                                                                                    
REPRESENTATIVE HERRON  expressed his fear of  the state becoming,                                                               
in essence, a  sub-national oil company and  requested Mr. Parady                                                               
to comment in this regard.                                                                                                      
MR. PARADY replied  he has never heard a  whisper of conversation                                                               
in AIDEA regarding  becoming an oil and gas company.   He said he                                                               
doesn't believe  that that has  any traction as a  workable idea,                                                               
the magnitude of  that is mindboggling.  He noted  that AIDEA has                                                               
a concern with  Amendment 5 because it  potentially impacts other                                                               
projects and  has unintended  consequences.   He deferred  to Mr.                                                               
John Springsteen to provide further response.                                                                                   
JOHN   SPRINGSTEEN,   Executive   Director,   Alaska   Industrial                                                               
Development   and  Export   Authority   (AIDEA),  Department   of                                                               
Commerce, Community & Economic  Development (DCCED), responded he                                                               
is  concerned Amendment  5 would  disrupt AIDEA's  ability to  do                                                               
what  the legislature  intends AIDEA  to do  to support  resource                                                               
development in the state.  It  would create a hurdle to financing                                                               
independent,  small  and medium  sized  oil  and gas  developers.                                                               
When AIDEA  offers financing to  these developers,  he explained,                                                               
reserves  and  working  interests  are often  a  portion  of  the                                                               
security and collateral for the financing.                                                                                      
3:15:03 PM                                                                                                                    
CO-CHAIR  TALERICO  stated he  thinks  Amendment  5 is  aimed  at                                                               
direct  ownership and  not financing,  in  other words  [AIDEA's}                                                               
name  is on  the title  so to  speak.   He  said he  sees a  huge                                                               
difference  between  providing  the   actual  collateral  to  get                                                               
financing  and  being  the  outright owner.    He  requested  Mr.                                                               
Springsteen to comment on this.                                                                                                 
MR. SPRINGSTEEN  answered the phrase  "become a  working interest                                                               
owner of  a natural gas lease"  [is of concern].   Often AIDEA is                                                               
provided security and  collateral in the form of if  there is not                                                               
performance on the financing that AIDEA  would then, as a fact of                                                               
default or nonperformance,  become a working interest  owner of a                                                               
natural gas lease  since that is the security  or collateral that                                                               
is offered.                                                                                                                     
3:16:00 PM                                                                                                                    
REPRESENTATIVE  HAWKER said  he can  appreciate the  argument for                                                               
the ability to  stake the greatest claim on the  collateral of an                                                               
entity  that  [the  state]  is   supporting.    He  posited  that                                                               
collateral agreements could  be structured so that,  should it be                                                               
necessary  to foreclose,  the  collateral would  go  back to  the                                                               
sovereign, the  Department of Natural Resources,  where it really                                                               
belongs  and  not   into  the  hands  of  AIDEA.     Amendment  5                                                               
specifically says "unless the  authority has obtained legislative                                                               
approval".    This  is  where  if AIDEA  wishes  to  establish  a                                                               
situation where  it could accede  to working ownership  rights in                                                               
active  exploration and  production development  he thinks  AIDEA                                                               
needs to bring a specific  proposal to the legislature to discuss                                                               
its merits, which is why this amendment should be passed.                                                                       
MR.  PARADY allowed  Representative  Hawker's  comments are  well                                                               
founded  that, on  its plain  face,  the issue  is not  material.                                                               
However,  the language  "become  a working  interest  owner of  a                                                               
natural  gas lease"  is  of substantial  concern  because it  has                                                               
unintended   consequences  to   AIDEA's  routine   operations  as                                                               
directed by  the legislature  in the context  of financing.   The                                                               
Mustang operation center is an  example and Mr. Springsteen could                                                               
elaborate further on the collateral and its collection.                                                                         
3:17:52 PM                                                                                                                    
REPRESENTATIVE TARR,  regarding the suggestion that  in a default                                                               
situation the resource  should go back to  the sovereign, posited                                                               
that that  would leave AIDEA  in a  position of being  unpaid and                                                               
would need  to find  some way  to be  paid.   She asked  how that                                                               
situation would be resolved.                                                                                                    
MR. PARADY deferred to Mr. Springsteen or Mr. Leonard.                                                                          
MR.  SPRINGSTEEN agreed  there would  need to  be some  provision                                                               
that AIDEA would  be whole in its financing  arrangement with the                                                               
borrower.  He deferred to  Mr. James Hemsath for providing detail                                                               
on the Mustang opportunity.                                                                                                     
JAMES   HEMSATH,   Director,   Project  Development   and   Asset                                                               
Management,  Alaska Industrial  Development and  Export Authority                                                               
(AIDEA),   Department   of   Commerce,   Community   &   Economic                                                               
Development (DCCED), stated that  his section is responsible for,                                                               
and did  the deal with, Brooks  Range Petroleum as it  relates to                                                               
Mustang.  He said AIDEA has,  through its LLC in partnership with                                                               
"CES  Singapore Corporation",  a 20  percent working  interest in                                                               
the Mustang field.  He continued:                                                                                               
     That working interest  is important to us  in two ways.                                                                    
     One  is  collateral has  been  discussed,  but it  also                                                                    
     defines the very specific stream  of revenue that we're                                                                    
     using for our return of  revenues for the ownership, or                                                                    
     the leasing  of the  operating facility,  the operating                                                                    
     company  Brooks  Range.   With  regard  to the  working                                                                    
     interest owner, as  we put a lien, or,  which a working                                                                    
     interest owners  and ownership  or a  lien on  a field,                                                                    
     those have  to be  perfected.   You're not  halfway in,                                                                    
     you're either  a working interest owner  or you're not.                                                                    
     You're not  a working interest  owner only in  the case                                                                    
     if something  happens in default that  that negates the                                                                    
     security that  negates the collateral.   Quite frankly,                                                                    
     the Department of Natural  Resources [DNR] doesn't like                                                                    
     it.  We lost almost  two months in our project schedule                                                                    
     this  year  with  DNR  as   we  perfected  the  working                                                                    
     interest  ownership with  AIDEA.   They are  very, very                                                                    
     particular on  it and they  don't like  halfway things.                                                                    
     So that aspect of working  interest owner is very, very                                                                    
     critical  to us  in  terms of  not  only collateral  on                                                                    
     security  on  a  deal  but   also  in  identifying,  if                                                                    
     necessary, revenue  streams and  where they  are coming                                                                    
MR.  HEMSATH, regarding  AIDEA's investment  and ability  to have                                                               
this  kind of  collateral  in Mustang  specifically, stated  that                                                               
AIDEA's $70  million of investment leveraged  almost $700 million                                                               
of investment in that field and  that simply would not have taken                                                               
place if AIDEA  hadn't been involved.  That  aspect of collateral                                                               
and working interest ownership was a key component of that deal.                                                                
3:20:45 PM                                                                                                                    
REPRESENTATIVE  HAWKER said  he understands  contracts and  where                                                               
Mr. Hemsath  is going to  at this point.   The specific  issue of                                                               
working interest at Mustang is  an interesting conundrum.  As the                                                               
maker of  Amendment 5 he  said he believes it  remains absolutely                                                               
critical that  the legislature tell  the elements that  have been                                                               
trying  to negotiate  in-place resources  in Cook  Inlet for  the                                                               
Interior Energy Project  that this is not something  that will be                                                               
entered into without  further discussion by the  legislature.  He                                                               
recognized the concerns that have  been pointed out with Mustang,                                                               
but said he  still believes the amendment should be  passed as it                                                               
is.   He  offered his  commitment to  working with  the folks  at                                                               
AIDEA as  HB 105 moves  through its  next committee and  onto the                                                               
floor to find  a further amendment that can  relieve the concerns                                                               
raised  by  AIDEA today  with  regard  to financing  and  working                                                               
within projects  in the North  Slope in the manner  the committee                                                               
has been discussing.                                                                                                            
3:21:55 PM                                                                                                                    
REPRESENTATIVE  TARR  stated that  in  addition  to the  concerns                                                               
raised  by AIDEA,  she  is concerned  about  timing because  this                                                               
might hinder AIDEA's ability to  move forward on the project over                                                               
the next  eight months  and having  to wait to  come back  to the                                                               
legislature.   If  there were  other important  items before  the                                                               
legislature  things  could get  pushed  out  even further.    She                                                               
inquired  whether, in  the financing  world, that  kind of  delay                                                               
could cause  things to fall  through by adding  uncertainty since                                                               
there  would be  no  guarantee that  the  legislature would  give                                                               
MR. PARADY  replied timing is of  concern and will come  up again                                                               
when Amendment 6 is discussed.                                                                                                  
3:23:38 PM                                                                                                                    
CO-CHAIR NAGEAK remarked  that what the committee  is doing today                                                               
is protecting the  interests of the State of Alaska.   The job of                                                               
the  legislature is  to  listen to  the  administration and  then                                                               
deliberate, that is the process.   Legislators need to understand                                                               
exactly what the  state is getting into.   Without amendments and                                                               
discussion legislators would be derelict in their duty.                                                                         
REPRESENTATIVE SEATON  said he is  supportive of the idea  of not                                                               
acquiring  gas  reserves,  but   uncomfortable  with  passing  an                                                               
amendment that  has "collateral damage"  on the ability  of AIDEA                                                               
to do other things.  He  urged that Amendment 5 be redrafted with                                                               
all  the particulars  in  it  and then  passed.    That way,  the                                                               
committee would be  voting on an amendment that  does not curtail                                                               
what the legislature has asked AIDEA  to do, such as with Mustang                                                               
and others.                                                                                                                     
REPRESENTATIVE JOSEPHSON stated he  thinks AIDEA's officials have                                                               
made  the case  that there  is direct  linkage between  the words                                                               
"working interest  owner of  a natural  gas lease"  and [AIDEA's]                                                               
security and collateral attached to  that working interest.  This                                                               
is  a resource  development issue,  he said,  this is  what AIDEA                                                               
does.   There are  different mechanisms that  are used  to foster                                                               
oil and  gas development.   He said  Amendment 5 would  make some                                                               
sense if there was  a period full stop after the  words "or a gas                                                               
lease" and, since it does not, he cannot support it.                                                                            
3:26:32 PM                                                                                                                    
MR. PARADY  stated that,  regardless of  the outcome  here, AIDEA                                                               
would  be  glad  to  work  with  committee  members  to  vet  the                                                               
language.   He said he  does not want  to lose another  period of                                                               
time while  moving to the close  of the legislative session.   It                                                               
is the legislative discretion of  committee members as to whether                                                               
it is the  withdrawal, redrafting, and bringing  of the amendment                                                               
back in another  form, or adopting and then fixing.   However, in                                                               
his experience, it is usually best to get it right.                                                                             
REPRESENTATIVE  JOHNSON pointed  out that  the next  committee of                                                               
referral for  HB 105  is the House  Rules Standing  Committee [of                                                               
which  he is  the  chair]  and he  is  not  bashful about  fixing                                                               
legislation and problems in that committee.                                                                                     
REPRESENTATIVE  TARR   said  she   maintains  her   objection  to                                                               
Amendment 5 based  on the problems brought up.   Saying it sounds                                                               
like there  is an  opportunity to rework  the wording,  she asked                                                               
whether the maker of the amendment has a comment on that.                                                                       
REPRESENTATIVE HAWKER  stated he  thinks this committee  needs to                                                               
put  on the  record its  absolute statement  about not  acquiring                                                               
assets  in the  Cook  Inlet, through  either  leasing or  working                                                               
interest ownership, to support the  Interior Energy Project.  The                                                               
chairman of the  House Rules Standing Committee has  said he will                                                               
not let HB  105 out of that committee without  ensuring the issue                                                               
is fixed to  the satisfaction of AIDEA.  He  assured the folks at                                                               
AIDEA that  this issue will be  resolved before the bill  gets to                                                               
the House floor.                                                                                                                
REPRESENTATIVE  JOHNSON   pointed  out  that  as   of  today  the                                                               
legislature is under the 24-hour rule.                                                                                          
REPRESENTATIVE TARR  maintained her objection, saying  she is not                                                               
on  the House  Rules Standing  Committee and  will therefore  not                                                               
have an opportunity to weigh in on this amendment.                                                                              
3:29:08 PM                                                                                                                    
A  roll call  vote was  taken.   Representatives Herron,  Hawker,                                                               
Johnson, Olson, Nageak, and Talerico  voted in favor of Amendment                                                               
5.   Representatives  Seaton, Josephson,  and Tarr  voted against                                                               
it.  Therefore, Amendment 5 was adopted by a vote of 6-3.                                                                       
3:29:59 PM                                                                                                                    
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 6,  labeled 29-                                                               
GH1019\H.4, Shutts, 3/28/15, which read:                                                                                        
     Page 5, line 4, following "Alaska":                                                                                        
          Insert ", if the Alaska Industrial Development                                                                    
        and Export Authority prepares a project plan and                                                                    
     receives legislative approval of the plan. The project                                                                 
     plan must                                                                                                              
               (1)  identify the source of the natural gas;                                                                 
               (2)  include the estimated cost of the                                                                       
     project; and                                                                                                           
               (3)  include the estimated price of natural                                                                  
       gas under the project for natural gas utilities in                                                                   
     Fairbanks before distribution to consumers"                                                                            
REPRESENTATIVE SEATON objected for purposes of discussion.                                                                      
3:30:05 PM                                                                                                                    
REPRESENTATIVE HAWKER  said Amendment 6 is  about the legislature                                                               
maintaining power  of appropriation  and wanting to  know exactly                                                               
what it  is buying before writing  the check, as well  as knowing                                                               
how many  more checks will  need to  be written after  that first                                                               
one.   The amendment specifically adds  a legislative sanctioning                                                               
requirement  before  AIDEA  can  access  the  sustainable  energy                                                               
transmission and supply  development (SETS) bonding authorization                                                               
that is provided  in the bill.  The amendment  makes no change in                                                               
the  authority for  AIDEA to  move forward  with the  SETS funded                                                               
projects.  Because  there are so many unknowns  - from regulatory                                                               
authority to rate protection to  ownership to security interest -                                                               
he  would  like   to  have  the  project  plan   brought  to  the                                                               
legislature for approval.  Amendment  6 requires AIDEA to develop                                                               
a  project  plan before  the  project  can  go forward  and  that                                                               
project  plan must  receive legislative  approval, which  is very                                                               
much as  the legislature did  with the original project  plan for                                                               
AGDC.    Amendment  6  requires  three things  that  must,  at  a                                                               
minimum, be  included in the plan:   the source of  the gas, cost                                                               
of the project, and the price  for that gas under the project for                                                               
the  utilities in  Fairbanks  before  distribution to  consumers.                                                               
This  will provide  a sound  basis for  ensuring that  this is  a                                                               
consumer cost-driven  project and  the legislature would  like to                                                               
make  that decision  and  judgement about  having  met that  cost                                                               
objective before it invests more.   Over $12 million was spent on                                                               
the North Slope, which is either  going to have to be written off                                                               
or  recovered in  some manner.    That $12  million of  write-off                                                               
might have been avoided had  there been a sanctioning requirement                                                               
for that  first time around.   It is important to  have a project                                                               
that  goes forward  that meets  the price  expectancy/demand that                                                               
the community  has insisted upon, and  he also wants to  know how                                                               
many  more  checks   the  legislature  will  have   to  write  to                                                               
accomplish that.  According to  testimony at the committee's last                                                               
meeting, this money is just the  tip of the iceberg; a great deal                                                               
more government support will be  needed to make this project work                                                               
and bring gas  to all consumers at the price  objective.  It must                                                               
be ensured the legislature is  helping the folks in Fairbanks and                                                               
that  proper decisions  are made  to preclude  falling victim  to                                                               
having an agency  that wants a project for a  project's sake that                                                               
does not accomplish the goals  the legislature wants to establish                                                               
as  policy  direction  for  it.   He  said  he  doesn't  want  to                                                               
micromanage the process,  but wants that policy  box provided for                                                               
AIDEA  to  put  this  together  and come  back  to  talk  to  the                                                               
legislature about  the alternatives AIDEA is  studying before the                                                               
legislature authorizes  the spending  of hundreds of  millions of                                                               
dollars.  He urged committee members to support Amendment 6.                                                                    
3:34:28 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON stated  Amendment  6  is the  amendment                                                               
that gives him the greatest concern.   He said there is danger in                                                               
any member  being a  purist and  saying to  monitor this  sort of                                                               
expenditure  or to  keep hands  off  in trust  of the  authority.                                                               
Senate Bill  23 was  the previous  administration's concept.   It                                                               
didn't work and  AIDEA did the responsible thing when  it said it                                                               
cannot get there at the right  burner tip price and is abandoning                                                               
that.  He said  he doesn't know what the alternative  is.  If the                                                               
belief  is  in  natural  gas   for  the  Interior,  stopping  the                                                               
nonattainment  problem, and  keeping an  economy going  so people                                                               
aren't fleeing  the city and the  borough for lack of  ability to                                                               
stay there,  he hasn't heard of  anywhere else to get  gas and so                                                               
Cook  Inlet  is   being  looked  at  pending   a  large  gasline.                                                               
Comparison   was  made   to   the   Alaska  Gasline   Development                                                               
Corporation (AGDC) and the Alaska LNG  Project, but that is up to                                                               
a $65 billion  project and a very different kind  of thing.  Lost                                                               
money on the  North Slope with the LNG trucking  is a real issue.                                                               
When it comes  to these megaprojects there is no  question that a                                                               
better system  is needed to be  able to put on  the brakes before                                                               
the money goes out  the door.  But, if the  committee is going to                                                               
have a discussion about lost and  sunk costs, it will be here all                                                               
day.  In  the three years he  has been in the  legislature he has                                                               
seen so much spent and some  legislators think it would have been                                                               
wiser spent in a classroom, for  example.  Regarding the cost, he                                                               
said AIDEA  will hear from the  consumer just as it  did with the                                                               
LNG trucking.   He noted  that in his  community there is  a fair                                                               
amount of subsidizing, either real  or effective, of natural gas;                                                               
for example, [the state] does not tax  gas in the Cook Inlet.  He                                                               
expressed his  concern that AIDEA  is being hamstrung.   Further,                                                               
he queried, what  happens if AIDEA determines on,  say, April 20,                                                               
2016, that  it has the  package together but the  legislature has                                                               
adjourned?  Amendment 6 is too limiting.                                                                                        
3:37:34 PM                                                                                                                    
REPRESENTATIVE  TARR recalled  that  the  other day's  PowerPoint                                                               
presentation explained  it is  a phased  approach.   Through each                                                               
step there  is a  go or  no-go decision; AIDEA  got to  the final                                                               
stage and  made a no-go decision  on that.  In  other projects it                                                               
has worked on, the legislature  hasn't expected that kind of work                                                               
to be done without  any dollars being spent.  It  is a real shame                                                               
in regard to  all the money that has been  spent on projects that                                                               
will  not go  forward.   At the  same time,  the legislature  did                                                               
originally  authorize $250  million for  the project  and if  $12                                                               
million was spent  to get to the decision, then  not too much was                                                               
eaten  up.   She questioned  whether AIDEA  will be  able to  act                                                               
effectively   with  two   amendments  that   require  legislative                                                               
approval  given that  they would  not necessarily  happen at  the                                                               
same time.  She expressed her  concern that Fairbanks could be on                                                               
the verge of  collapse given [the state's]  current situation and                                                               
potential  job losses  in the  Fairbanks area,  coupled with  the                                                               
already-high energy prices.   Some people are paying  as much per                                                               
month for  heating cost as for  their mortgage.  She  offered her                                                               
appreciation  for the  legislature  having oversight  on what  is                                                               
happening and  being mindful of  the dollars that are  spent, but                                                               
expressed  her  fear  that  the Interior  won't  survive  if  the                                                               
amendments push out the project by a year or more.                                                                              
3:40:22 PM                                                                                                                    
CO-CHAIR TALERICO reminded members that  his intention is to move                                                               
HB 105 out  of committee today and said the  bill likely will not                                                               
move without  these amendments.   He further  noted the  bill has                                                               
two more committees of referral.                                                                                                
CO-CHAIR NAGEAK stated there is  a lot of institutional knowledge                                                               
within the Capitol building that  committee members can draw upon                                                               
and not  have to worry about  doing something wrong.   The people                                                               
with this  knowledge can help  members get through  this process.                                                               
Those  members  involved in  natural  resource  issues have  been                                                               
through a  lot and have the  knowledge and experience.   He added                                                               
that it is good to have different points of view.                                                                               
REPRESENTATIVE SEATON  commented he  is unsure how  someone would                                                               
negotiate to get  natural gas if it cannot be  used as collateral                                                               
or  as  a working  interest  ownership  to  provide a  source  of                                                               
revenue on  that gas.   A contract  cannot be offered  because it                                                               
must come  back to the  legislature for approval of  the program.                                                               
He said he  hopes things will get adjusted in  the next committee                                                               
so that  the project  will be  able to  move forward  rather than                                                               
being stopped.                                                                                                                  
3:43:02 PM                                                                                                                    
REPRESENTATIVE   SEATON  offered   Conceptual   Amendment  1   to                                                               
Amendment 6  as follows:   at the end  of line 4,  after "natural                                                               
gas", add  "or propane".  This  will make it consistent  with the                                                               
previously adopted amendment.                                                                                                   
REPRESENTATIVE HAWKER said he has  no objection to the conceptual                                                               
amendment.  There  being no objection, Conceptual  Amendment 1 to                                                               
Amendment 6 was adopted.                                                                                                        
3:43:28 PM                                                                                                                    
MR. PARADY  recalled the  maker of the  amendment stating  in his                                                               
opening remarks  his desire that  the legislature  discuss openly                                                               
and  thoroughly the  policy box  while  not micromanaging  inside                                                               
that box.   However, that is  exactly what Amendment 6  does, Mr.                                                               
Parady said.   He  stated six reasons  for opposing  Amendment 6.                                                               
First, it  will cause substantial delay,  particularly in dealing                                                               
with the  nonattainment status  for the  Environmental Protection                                                               
Agency (EPA) in  the Interior region.  Second, it  will chill the                                                               
private investment community  as AIDEA works with  members of the                                                               
private investment  community to carry  forward as it did  on the                                                               
North  Slope project  for the  public/private  partnership.   The                                                               
holders of  the private capital will  have no certainty as  to if                                                               
or when  AIDEA will  have access  to the  Senate Bill  23 funding                                                               
tools that were provided and  allow AIDEA to partner with private                                                               
developers.  Third, it undermines  the statutory authority of the                                                               
AIDEA board to  make investment decisions based  on AIDEA's well-                                                               
established due diligent process  investment criteria.  There has                                                               
not  been a  write-off  of an  AIDEA loan  in  a 12-year  period.                                                               
Fourth,  it  forces the  Interior  to  get a  second  legislative                                                               
authorization  to expend  the financing  tools that  were already                                                               
authorized  by the  legislature in  2013.   Fifth, it  limits and                                                               
potentially  eliminates any  potential North  Slope project  that                                                               
AIDEA  could   currently  finance   by  forcing  AIDEA   to  seek                                                               
legislative  approval of  any Interior  Energy  Project, not  any                                                               
Cook  Inlet  project.    Six,  it  dramatically  changes  AIDEA's                                                               
Interior  Energy Project  role in  the middle  of developing  the                                                               
project.   Horses are being changed  in the middle of  the stream                                                               
here.   Make no mistake  about it,  he said, the  commitment that                                                               
everyone shares to the Interior  project is substantially delayed                                                               
by this amendment.   The legislature assigned  AIDEA this project                                                               
and this  amendment moves to  handcuff AIDEA from  completing the                                                               
assignment that AIDEA was given.                                                                                                
3:45:24 PM                                                                                                                    
REPRESENTATIVE SEATON maintained his objection to Amendment 6.                                                                  
A  roll call  vote  was taken.    Representatives Olson,  Herron,                                                               
Hawker, Johnson, Nageak,  Talerico, and Seaton voted  in favor of                                                               
Amendment  6, as  amended.   Representatives  Josephson and  Tarr                                                               
voted  against  it.   Therefore,  Amendment  6, as  amended,  was                                                               
adopted by a vote of 7-2.                                                                                                       
3:46:41 PM                                                                                                                    
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 7,  labeled 29-                                                               
GH1019\H.10, Shutts, 4/7/15, which read:                                                                                        
     Page 4, following line 15:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 4. AS 44.88.170(a) is amended to read:                                                                      
          (a)  Except as provided in (c) of this section,                                                                   
     nothing   [NOTHING]  in   this  chapter   prevents  the                                                                
     inclusion in a  lease or other agreement  relating to a                                                                    
     project of  a provision granting the  right to purchase                                                                    
     the  project,  or  to  renew or  extend  the  lease  or                                                                    
     agreement, upon  the terms and conditions  that [WHICH]                                                                
     may be provided for in the lease or agreement.                                                                             
        * Sec.  5. AS 44.88.170 is  amended by adding  a new                                                                  
     subsection to read:                                                                                                        
          (c) The authority may not negotiate or enter into                                                                     
     a  gas  supply contract  with  a  natural gas  producer                                                                    
          (1) the contract is between a natural gas                                                                             
     producer and  natural gas distribution utility  that is                                                                    
     owned by  the authority or a  subsidiary corporation of                                                                    
     the authority and  the contract is for  the natural gas                                                                    
     producer to provide the utility,  and only the utility,                                                                    
     with  a   natural  gas   supply  for   distribution  to                                                                    
     customers of the utility; or                                                                                               
          (2) the authority obtains legislative approval."                                                                      
     Renumber the following bill sections accordingly.                                                                          
REPRESENTATIVE TARR objected.                                                                                                   
3:46:47 PM                                                                                                                    
REPRESENTATIVE HAWKER  said Amendment 7  is about his  concern in                                                               
regard to  keeping the state from  a role of picking  winners and                                                               
losers in  the marketplace.   He said the  amendment specifically                                                               
prohibits AIDEA from  negotiating and entering into  a gas supply                                                               
agreement  unless that  agreement  or agreements  are between  an                                                               
AIDEA-owned utility  and a  producer.  For  example, if  AIDEA is                                                               
successful  in purchasing  FNG and  becomes a  local distribution                                                               
company in Fairbanks,  AIDEA will need to be able  to procure gas                                                               
from a  producer or a  supplier in some  way to ensure  AIDEA has                                                               
gas  to distribute  in  the  utility that  the  state is  buying.                                                               
However,  Amendment 7  makes the  statement that  the legislature                                                               
does  not want  to  have AIDEA  interfering in  a  gas market  on                                                               
behalf of the  specific utilities that would  be benefitting from                                                               
the Interior Energy Project to  the disadvantage of all the other                                                               
public utilities that are competing  in that marketplace for that                                                               
same  gas in  the Cook  Inlet and  having to  negotiate the  same                                                               
contracts with the same suppliers.   The Cook Inlet gas market is                                                               
not the robust and  endless market it was 40 years,  it is a very                                                               
fragile  market  dependent  on continued  investment  by  smaller                                                               
companies, not companies with deep pockets.   It is a market that                                                               
is very susceptible  and sensitive to changes of  policy that the                                                               
legislature might  make in its  tax structures  or circumstances.                                                               
The  legislature  does not  want  the  heavy hand  of  government                                                               
advocating  on   behalf  of  one   group  of  consumers   to  the                                                               
disadvantage of other  consumers.  One branch  of government does                                                               
carry with it the weight of  all the ability of other branches of                                                               
government  to  bring  its   decision-making  ability  to  coerce                                                               
actions  from producers  and players.   "It's  not that  AIDEA is                                                               
going to go out there and  intimidate sellers," he said, "but ...                                                               
sellers are, in  fact, intimidated because there  are other state                                                               
agencies that might well take a  look at a decision they make and                                                               
say 'well, we're going to get  even with you guys for making that                                                               
decision.'"   That is  something the  legislature must  keep from                                                               
occurring.   Amendment 7 says  to let the utilities  negotiate on                                                               
behalf of themselves for their  gas, keep government out of those                                                               
negotiations so  there is no  appearance of conflict  or coercive                                                               
activity between  the state's agencies.   Nothing in  Amendment 7                                                               
precludes the utilities from the  Interior Energy Project banding                                                               
together and  being a  collective marketing  force into  the Cook                                                               
Inlet.  He urged committee members to support Amendment 7.                                                                      
3:50:35 PM                                                                                                                    
REPRESENTATIVE SEATON  noted Amendment 6 includes  a process that                                                               
before  the project  plan goes  forward a  source of  natural gas                                                               
must be identified.   Yet, he continued, AIDEA  is precluded from                                                               
negotiating any source  of natural gas.  He surmised  the idea is                                                               
that somebody else  has to negotiate that and then  come to AIDEA                                                               
and then  AIDEA can try to  put together a project  plan to bring                                                               
to the legislature for approval.  He requested clarification.                                                                   
REPRESENTATIVE HAWKER replied it  is unknown whether this project                                                               
is  going to  be totally  owned by  AIDEA or  a project  in which                                                               
AIDEA's role  is to benefit the  utilities.  When it  started out                                                               
it was  just supposed to  be benefitting the utilities,  but this                                                               
legislative  session it  was suddenly  announced  that AIDEA  was                                                               
going to start buying assets  without any explanation of what had                                                               
changed.   Nothing in Amendment  7 prevents a project  from going                                                               
forward  with  AIDEA  facilitating   and  helping  all  of  those                                                               
utilities  with the  financing for  transactions put  together by                                                               
the utilities.  It should not  be the State of Alaska stepping in                                                               
and deciding  to become the local  distribution company procuring                                                               
an asset  literally from the producer  all the way to  the burner                                                               
tip.   He said  this is  not something he  wants to  give blanket                                                               
approval to  AIDEA to do.   However, if that is  the project plan                                                               
and it  comes back to  the legislature  in the project  plan with                                                               
the  constraints of  Amendment 6,  then the  legislature gets  to                                                               
make that  decision, and if it  is the right decision,  so be it.                                                               
He  reiterated  he is  going  under  the  premise that  AIDEA  is                                                               
facilitating  and aiding  Alaska's  industry  to achieve  success                                                               
rather  than stepping  in and  competing in  the private  sector.                                                               
The  legislature doesn't  want  AIDEA  displacing private  sector                                                               
entities.    He  said  he  knows of  at  least  three  commercial                                                               
entities  that have  offered gas  out of  the Cook  Inlet to  the                                                               
utilities in  Fairbanks.  The  utilities should have a  chance to                                                               
look at  those commercial  private sector entities  to see  if it                                                               
would work and  then the utilities would go to  AIDEA and ask for                                                               
help  in financing  and  other help  for making  it  be a  viable                                                               
project.    That is  the  role  of  AIDEA,  in his  opinion,  not                                                               
stepping in and  owning projects.  While it is  a good thing that                                                               
AIDEA hasn't  written off  a loan  in 12 years,  there is  also a                                                               
horrible long  history of when  AIDEA steps in and  starts owning                                                               
physical assets that there have been problems.                                                                                  
3:54:05 PM                                                                                                                    
REPRESENTATIVE TARR noted  [Sections 4 and 5 of  Amendment 5] set                                                               
out parameters  in AS  44.88.170 and  AS 44.88.170(a)  that AIDEA                                                               
may  not purchase  or  acquire gas  reserves or  a  gas lease  or                                                               
become a working interest owner of  a natural gas lease unless it                                                               
receives  legislative approval.   She  observed that  Amendment 7                                                               
makes changes  to these previously  adopted sections.   She asked                                                               
whether [paragraphs (1)  and (2) of subsection  (c), lines 10-16,                                                               
of Amendment 7] are supposed to both be the requirements now.                                                                   
REPRESENTATIVE HAWKER responded correct.                                                                                        
3:55:01 PM                                                                                                                    
MR.  PARADY  said Amendment  7  continues  in  the same  vein  as                                                               
Amendment 6  in requiring legislative approval,  which introduces                                                               
great elements  of delay.  The  maker of the amendment  stated in                                                               
his opening  remarks that  he didn't want  the picking  of losers                                                               
and  winners in  the  marketplace.   The  marketplace has  picked                                                               
those losers and  they are the citizens of  Fairbanks.  Displayed                                                               
on the wall of the  Fairbanks Economic Development Corporation is                                                               
a front  page of the  Fairbanks Daily  News Miner from  1954 that                                                             
says gas  is coming to  Fairbanks.   While that gas  was propane,                                                               
not LNG, the  gas is still waiting 61 years  later.  This project                                                               
is as close as  it has ever been to getting  to achieve the goal;                                                               
AIDEA has worked  diligently to bring the project  forward.  This                                                               
is a familiar restriction or  micromanagement; AIDEA is trying to                                                               
do what  the legislature asked it  to do and will  continue to do                                                               
so as it works together with the legislature.                                                                                   
REPRESENTATIVE  JOSEPHSON stated  if  he was  one  of the  90,000                                                               
residents of the  North Slope Borough he would  be very concerned                                                               
about  what the  committee is  doing today  and would  express no                                                               
confidence that the state as  an entity is continuing to maintain                                                               
the  same objectives  and  the  same goals.    The committee  has                                                               
essentially neutered the agency, he said, and he is concerned.                                                                  
CO-CHAIR TALERICO commented  that this committee is  not the end-                                                               
all for  this bill.   Many more people will  see the bill  and be                                                               
working  on it,  he added,  which is  a good  thing and  what the                                                               
legislative process is all about.                                                                                               
REPRESENTATIVE SEATON  expressed his  concern that  the committee                                                               
has  gotten so  into the  restrictions  on the  ability for  this                                                               
project to go  forward that he doesn't think it  will go forward.                                                               
He said  he doesn't think  the utilities  will really be  able to                                                               
negotiate  because they  don't know  where their  partner is  and                                                               
everything  must come  back for  legislative approval  before any                                                               
funds  can  be set  up  or  anything  else for  equalizing  those                                                               
utility rates over time.  There  are the gas contracts and who is                                                               
going to  be able  to do  it.   A project  comes forward  but the                                                               
project is not really an AIDEA  project, it is a project from the                                                               
utilities, but  AIDEA must bring  the project to  the legislature                                                               
for approval before  it can go forward.  Thus  he is unsure where                                                               
it is going any more, the complications are extreme.                                                                            
3:58:35 PM                                                                                                                    
REPRESENTATIVE HAWKER said Amendment  7 is being mischaracterized                                                               
because  it is  the  big parameters  of the  box  that are  being                                                               
talked about.   It  is not  micromanaging inside  the box,  it is                                                               
defining  the box.   The  box is  that government  should not  be                                                               
messing in the  marketplace.  Nothing in Amendment  7 impedes the                                                               
utilities in  Fairbanks from procuring  gas for themselves.   All                                                               
the  amendment says  is  that the  legislature  doesn't want  the                                                               
state negotiating  those contracts  on behalf of  those utilities                                                               
and unfairly  advantaging them against  other folks  competing in                                                               
the  open market  for that  same gas.     Nothing in  Amendment 7                                                               
impedes the  kind of project that  this is supposed to  be, which                                                               
is that AIDEA's role is  providing assistance to the community of                                                               
Fairbanks to get Fairbanks a  local distribution structure around                                                               
gas that  is able to  be delivered at $15  per MCF at  the burner                                                               
tip.   He  said  he  doesn't think  any  [legislators] are  quite                                                               
buying into  wanting the state  to be carrying the  entire burden                                                               
of ownership of the project;  local control is wanted, not making                                                               
Fairbanks  a permanent  protectorate of  the state  and AIDEA  in                                                               
order to meet these objectives.                                                                                                 
4:00:34 PM                                                                                                                    
REPRESENTATIVE TARR maintained her objection to Amendment 7.                                                                    
A  roll call  vote was  taken.   Representatives Johnson,  Olson,                                                               
Herron, Hawker, Nageak, and Talerico  voted in favor of Amendment                                                               
7.   Representatives  Seaton, Josephson,  and Tarr  voted against                                                               
it.  Therefore, Amendment 7 was adopted by a vote of 6-3.                                                                       
4:01:23 PM                                                                                                                    
CO-CHAIR  TALERICO stated  he thinks  the legislative  process is                                                               
appropriate and  HB 105 will move  on to its other  committees of                                                               
referral.   He said he would  like to entertain a  motion to move                                                               
the bill from committee.                                                                                                        
REPRESENTATIVE TARR said  she will not object to  the bill moving                                                               
out  of committee  because  it  is so  important.   However,  she                                                               
continued, what has been done today  caused a lot of damage.  She                                                               
expressed her discomfort with the  limitations that have been put                                                               
on,  especially following  previous  legislation that  authorized                                                               
AIDEA for  $275 million to move  forward on this project  and now                                                               
there is back  tracking on that initiative.  This  is sending the                                                               
wrong message  to the  people of Fairbanks  and the  Interior who                                                               
have been disproportionately burdened by  high energy costs.  She                                                               
offered her  hope that the bill  will be improved as  it is moved                                                               
REPRESENTATIVE  HAWKER  took  issue  with  Representative  Tarr's                                                               
statements, saying  he has family  in Fairbanks and wants  to see                                                               
the right  thing done  for Interior Alaska,  not the  wrong thing                                                               
happening in  [the legislature's]  best efforts  to do  the right                                                               
thing and that is what it is about today.                                                                                       
4:04:04 PM                                                                                                                    
REPRESENTATIVE HAWKER moved to report  HB 105, as amended, out of                                                               
committee  with individual  recommendations and  the accompanying                                                               
zero  fiscal note.   There  being no  objection, HB  105(RES) was                                                               
reported from the House Resources Standing Committee.                                                                           

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