Legislature(2011 - 2012)BELTZ 105 (TSBldg)


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                    ALASKA STATE LEGISLATURE                                                                                  
    SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                  
                         April 5, 2012                                                                                          
                           4:09 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Donald Olson, Chair                                                                                                     
Senator Thomas Wagoner                                                                                                          
Senator Linda Menard                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Albert Kookesh                                                                                                          
Senator Johnny Ellis                                                                                                            
OTHER LEGISLATORS PRESENT                                                                                                     
Representative Mike Chenault                                                                                                    
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 314                                                                                                              
"An Act extending  the time period for which  the Alaska Railroad                                                               
Corporation  may  lease  land  without  reserving  the  right  to                                                               
terminate the lease; and providing for an effective date."                                                                      
     - HEARD & HELD                                                                                                             
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 9(FIN) AM                                                                               
"An Act  relating to the Alaska  Gasline Development Corporation,                                                               
a  subsidiary created  project developed  by  the Alaska  Gasline                                                               
Development Corporation;  relating to  the by the  Alaska Housing                                                               
Finance Corporation;  establishing and  relating to  the in-state                                                               
regulation by the Regulatory Commission  of Alaska of an in-state                                                               
natural gas  pipeline natural gas  pipeline fund;  making certain                                                               
information  provided  to or  by  the  Alaska that  is  expressly                                                               
authorized  to  provide  transportation as  a  contract  carrier;                                                               
relating   to  Gasline   Development   Corporation  exempt   from                                                               
inspection as  a public record;  relating the Alaska  Natural Gas                                                               
Development Authority; relating to  the procurement of certain to                                                               
the  Joint In-State  Gasline Development  Team;  relating to  the                                                               
judicial  review  of  a  services   by  the  Alaska  Natural  Gas                                                               
Development  Authority;  exempting  property  of  a  right-of-way                                                               
lease  or an  action or  decision related  to the  development or                                                               
construction  of   project  developed   by  the   Alaska  Gasline                                                               
Development  Corporation  from  property  taxes  an  oil  or  gas                                                               
pipeline on state  land; relating to the lease  of a right-of-way                                                               
by the  Alaska before the commencement  of commercial operations;                                                               
and providing  for an  effective Gasline  Development Corporation                                                               
or a successor in interest for a gas pipeline date."                                                                            
     - HEARD & HELD                                                                                                             
CS FOR HOUSE BILL NO. 264(CRA)                                                                                                  
"An Act  allowing a deferral  of municipal property taxes  on the                                                               
increase  in   the  value  of   real  property   attributable  to                                                               
subdivision  of that  property;  and providing  for an  effective                                                               
     - REMOVED FROM AGENDA                                                                                                      
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 314                                                                                                                  
SHORT TITLE: ALASKA RAILROAD LAND LEASES                                                                                        
SPONSOR(s): LABOR & COMMERCE                                                                                                    
02/06/12       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/06/12       (H)       L&C                                                                                                    
02/17/12       (H)       L&C AT 3:15 PM BARNES 124                                                                              
02/17/12       (H)       Moved Out of Committee                                                                                 
02/17/12       (H)       MINUTE(L&C)                                                                                            
02/20/12       (H)       L&C RPT 5DP                                                                                            
02/20/12       (H)       DP: CHENAULT, THOMPSON, HOLMES, MILLER,                                                                
03/14/12       (H)       TRANSMITTED TO (S)                                                                                     
03/14/12       (H)       VERSION: HB 314                                                                                        
03/16/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/16/12       (S)       CRA                                                                                                    
04/05/12       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
BILL: HB   9                                                                                                                  
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP                                                                                  
SPONSOR(s): REPRESENTATIVE(s) CHENAULT                                                                                          
01/18/11       (H)       PREFILE RELEASED 1/7/11                                                                                
01/18/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/18/11       (H)       RES, FIN                                                                                               
02/06/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/06/12       (H)       Heard & Held                                                                                           
02/06/12       (H)       MINUTE(RES)                                                                                            
02/08/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/08/12       (H)       Heard & Held                                                                                           
02/08/12       (H)       MINUTE(RES)                                                                                            
02/10/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/10/12       (H)       Heard & Held                                                                                           
02/10/12       (H)       MINUTE(RES)                                                                                            
02/13/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/13/12       (H)       <Bill Hearing Canceled>                                                                                
02/24/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/24/12       (H)       Heard & Held                                                                                           
02/24/12       (H)       MINUTE(RES)                                                                                            
02/27/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/27/12       (H)       Moved CSHB   9(RES) Out of Committee                                                                   
02/27/12       (H)       MINUTE(RES)                                                                                            
02/29/12       (H)       RES RPT CS(RES) NT 4DP 2DNP 1NR 2AM                                                                    
02/29/12       (H)       DP: MUNOZ, FOSTER, HERRON, SEATON                                                                      
02/29/12       (H)       DNP: KAWASAKI, GARDNER                                                                                 
02/29/12       (H)       NR: FEIGE                                                                                              
02/29/12       (H)       AM: DICK, P.WILSON                                                                                     
02/29/12       (H)       LETTER OF INTENT WITH RES REPORT                                                                       
03/13/12       (H)       FIN AT 8:30 AM HOUSE FINANCE 519                                                                       
03/13/12       (H)       Heard & Held                                                                                           
03/13/12       (H)       MINUTE(FIN)                                                                                            
03/16/12       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/16/12       (H)       Heard & Held                                                                                           
03/16/12       (H)       MINUTE(FIN)                                                                                            
03/20/12       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/20/12       (H)       Heard & Held                                                                                           
03/20/12       (H)       MINUTE(FIN)                                                                                            
03/21/12       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/21/12       (H)       <Bill Held Over to 6:30 pm Today>                                                                      
03/21/12       (H)       FIN AT 6:30 PM HOUSE FINANCE 519                                                                       
03/21/12       (H)       Heard & Held                                                                                           
03/21/12       (H)       MINUTE(FIN)                                                                                            
03/22/12       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/22/12       (H)       <Bill Held Over to 5:00 pm Today>                                                                      
03/22/12       (H)       FIN AT 5:00 PM HOUSE FINANCE 519                                                                       
03/22/12       (H)       Heard & Held                                                                                           
03/22/12       (H)       MINUTE(FIN)                                                                                            
03/23/12       (H)       FIN RPT CS(FIN) NT 6DP 1DNP 3NR 1AM                                                                    
03/23/12       (H)       DP:   FAIRCLOUGH,    T.WILSON,   NEUMAN,                                                               
                         COSTELLO, EDGMON, THOMAS                                                                               
03/23/12       (H)       DNP: GARA                                                                                              
03/23/12       (H)       NR: DOOGAN, JOULE, STOLTZE                                                                             
03/23/12       (H)       AM: GUTTENBERG                                                                                         
03/23/12       (H)       RESOURCES LETTER OF INTENT WITH FIN                                                                    
03/23/12       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/23/12       (H)       Moved CSHB   9(FIN) Out of Committee                                                                   
03/23/12       (H)       MINUTE(FIN)                                                                                            
03/27/12       (H)       TRANSMITTED TO (S)                                                                                     
03/27/12       (H)       VERSION: CSHB 9(FIN) AM                                                                                
03/28/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/28/12       (S)       CRA, RES, FIN                                                                                          
04/03/12       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
04/03/12       (S)       <Above Item Removed from Agenda>                                                                       
04/03/12       (S)       MINUTE(CRA)                                                                                            
04/05/12       (S)       CRA AT 3:30 PM BELTZ 105 (TSBldg)                                                                      
WITNESS REGISTER                                                                                                              
ANNA LATHAM, Staff                                                                                                              
Representative Kurt Olson                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Introduced HB 314.                                                                                        
JIM KUBITZ, Vice President                                                                                                      
Real Estate and Facilities                                                                                                      
Alaska Railroad Corporation                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: No comment.                                                                                               
REPRESENTATIVE MIKE CHENAULT                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Sponsor of HB 9.                                                                                          
THOMAS WRIGHT, Staff                                                                                                            
Representative Mike Chenault                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska,                                                                                                                 
POSITION STATEMENT: Introduced HB 9 on behalf of the sponsor.                                                                 
RENA DELBRIDGE, Staff                                                                                                           
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Introduced HB 9.                                                                                          
DANIEL FAUSKE, President                                                                                                        
Alaska Gasline Development Corporation                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided supportive testimony for HB 9.                                                                   
JOE DUBLER, Vice President                                                                                                      
Alaska Gasline Development Corporation                                                                                          
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided supportive testimony for HB 9.                                                                   
ACTION NARRATIVE                                                                                                              
4:09:40 PM                                                                                                                    
CHAIR  DONALD  OLSON called  the  Senate  Community and  Regional                                                             
Affairs Standing Committee meeting to  order at 4:09 p.m. Present                                                               
at  the call  to order  were Senators  Menard, Wagoner  and Chair                                                               
               HB 314-ALASKA RAILROAD LAND LEASES                                                                           
4:09:52 PM                                                                                                                    
CHAIR OLSON announced the consideration of HB 314.                                                                              
4:10:06 PM                                                                                                                    
ANNA LATHAM,  Staff for Representative  Kurt Olson,  Alaska State                                                               
Legislature, said HB  314 would extend the time  period for which                                                               
the  Alaska Railroad  Corporation  (ARC) may  lease land  without                                                               
reserving the  right to  terminate the lease.  She said  the bill                                                               
would extend the  maximum ARC property lease terms  from 55 years                                                               
to 95 years.                                                                                                                    
She said railroads have historically  owned large parcels of land                                                               
which  they  lease  to  generate  revenue.  She  said  ARC  owned                                                               
approximately 36,000  acres with 260 long-term  leases accounting                                                               
for 2,000  leased acres.  She said  out of  the 36,000  acres, 38                                                               
percent of the  land was devoted to right-of-way,  12 percent was                                                               
used for  operations and the  remaining 50 percent  was available                                                               
for lease.                                                                                                                      
She said  ARC was a state  owned entity with an  economic mandate                                                               
for  statewide development  and longer  lease terms  would be  in                                                               
line with that directive. She  said longer leases would encourage                                                               
high  value  building  construction by  assuring  developers  and                                                               
financers that  developments would retain their  value for future                                                               
She  said standard  leases would  not be  95 years  and extending                                                               
terms was  at the discretion of  the ARC board of  directors. She                                                               
said HB 314  had received wide spread support  from lease holders                                                               
and multiple  municipalities, such  as Anchorage,  Valdez, Seward                                                               
and Whittier.                                                                                                                   
4:12:40 PM                                                                                                                    
JIM KUBITZ,  Vice President, Real  Estate and  Facilities, Alaska                                                               
Railroad Corporation, said  he had no comments  and was available                                                               
to answer questions.                                                                                                            
4:12:55 PM                                                                                                                    
CHAIR OLSON said HB 314 would be set aside.                                                                                     
            HB   9-IN-STATE GASLINE DEVELOPMENT CORP                                                                        
4:13:10 PM                                                                                                                    
CHAIR OLSON announced the consideration of HB 9.                                                                                
4:13:16 PM                                                                                                                    
REPRESENTATIVE MIKE  CHENAULT, Alaska State Legislature,  said HB                                                               
9 was a continuation of HB 369,  a bill passed in 2010 that dealt                                                               
with an in-state gas pipeline. He  said HB 9 would remove hurdles                                                               
and  roadblocks for  the Alaska  Gasline Development  Corporation                                                               
(AGDC) to move  the pipeline project forward. He said  HB 9 was a                                                               
complex  bill  that  was  crafted to  fit  concerns  of  numerous                                                               
4:14:57 PM                                                                                                                    
CHAIR OLSON asked how HB 9 differed from HB 369.                                                                                
REPRESENTATIVE  CHENAULT   responded  that  HB  9   was  enabling                                                               
legislation that helped  to move the in-state gas  pipeline to an                                                               
open  season. He  said  HB  369 set  the  foundation  for what  a                                                               
project  should look  like  within the  restrictions  set by  the                                                               
Alaska  Gasline Inducement  Act (AGIA)  process. He  said HB  369                                                               
asked  AGDC to  look at  the  most economic  pipeline route  from                                                               
Prudhoe Bay  to "tidewater" in  Southcentral. He said HB  9 would                                                               
allow  AGDC to  proceed down  a path  to get  to a  possible open                                                               
season with shippers and sellers.                                                                                               
4:16:52 PM                                                                                                                    
THOMAS WRIGHT,  Staff for  Representative Chenault,  Alaska State                                                               
Legislature, said  HB 9 had  undergone a transformation  since it                                                               
started out in  2011. He said HB  9 sets a framework  for AGDC to                                                               
serve as the state's gas  pipeline entity and to continue working                                                               
on  the 500  million standard  cubic feet  per day  (MMSCFD) line                                                               
that would link  North Slope gas to Fairbanks  and the "Railbelt"                                                               
at the lowest possible cost.                                                                                                    
He  said  AGDC  would  continue  to  analyze  where  commercially                                                               
feasible lines  could be built to  connect additional communities                                                               
to natural  gas. He said  HB 9 would  also provide AGDC  with the                                                               
structure to consider other gasline  opportunities now and in the                                                               
future. He  said AGDC would be  set up to act  on Alaska's behalf                                                               
to  participate on  an  aligned North  Slope  project with  Exxon                                                               
Mobil,  ConocoPhillips  and  British  Petroleum,  as  well  as  a                                                               
possible project with Trans Canada.                                                                                             
He said  HB 9  would consolidate state  spending on  gasline work                                                               
and  maximize  the  Alaska   Natural  Gas  Development  Authority                                                               
(ANGDA) work  as a gas marketing  entity. He said ANGDA  would be                                                               
redefined  as an  equal subsidiary  corporation under  the Alaska                                                               
Housing  Finance  Corporation  (AHFC).  He said  ANGDA  would  be                                                               
provided with the tools needed to act in its new role.                                                                          
He  said  HB 9  would  address  uncertainties pertaining  to  gas                                                               
pipeline  regulation and  whether the  carrier would  be able  to                                                               
offer  contractual   firm  service   needed  to   secure  project                                                               
He said  AGDC would be  empowered to  act on behalf  of Alaskans'                                                               
best interest in  proving natural gas to Alaskans.  He said state                                                               
and  local governments  would be  called upon  to participate  in                                                               
ways to  reduce tariffs that  Alaskans would ultimately  pay for,                                                               
i.e., waiving  property taxes during the  pipeline's construction                                                               
period and requiring state and  local resources be made available                                                               
at usual rates.                                                                                                                 
4:19:25 PM                                                                                                                    
MR. WRIGHT  said Section 1  in HB 9 expressed  legislative intent                                                               
and findings.                                                                                                                   
CHAIR OLSON asked if a lot of Section 1 was in HB 369.                                                                          
MR. WRIGHT answered that portions were derived from HB 369.                                                                     
He said  Section 2  added a  new section  to AHFC's  statutes and                                                               
described   AGDC's  duties   and   abilities   as  a   subsidiary                                                               
corporation. He said AGDC would  advance an in-state gas pipeline                                                               
project  and  proceed  with  additional  pipeline  analysis  once                                                               
construction started.  He said AGDC  would manage and  invest the                                                               
newly created pipeline  fund and noted that $200  million was set                                                               
aside last  year with $240  million required to get  AGDC through                                                               
an  open  season. He  said  following  the open  season  capacity                                                               
contract  phase,  making  natural  gas  available  to  Fairbanks,                                                               
Southcentral and  other communities  would proceed. He  said AGDC                                                               
may decide how a pipeline  would be owned and operated, including                                                               
joint ownership or operatorship. He  said AGDC would exercise the                                                               
state's  existing  right-of-way  of  eminent  domain  to  acquire                                                               
property and interest in pipelines  as needed. He said AGDC would                                                               
manage its assets  including transfer, disposal, parts  or all of                                                               
a pipeline project, provide transportation  of natural gas by way                                                               
of contract  carriage and issue  revenue bonds limited  to AGDC's                                                               
backing to carry out AGDC's purpose.                                                                                            
4:23:31 PM                                                                                                                    
MR.  WRIGHT said  Section 3  would  exempt ANGDA  from the  state                                                               
procurement   code  when   only   contracting  for   professional                                                               
services. He  said Section 3  was conforming language  to Section                                                               
He  said   Section  4  provided   AGDC  access   to  confidential                                                               
information  of  state agencies  that  were  directly related  to                                                               
designing,  constructing and  operating an  in-state natural  gas                                                               
pipeline.  He said  the Joint  In-State Gasline  Development Team                                                               
would change its name to AGDC.                                                                                                  
He said  Section 5 would  direct state agencies to  cooperate and                                                               
gave priority  to AGDC requests  and exempted leases  from common                                                               
carriage convents in the state  right-of-way leasing act. He said                                                               
the exemption allowed AGDC to operate as a contract carrier.                                                                    
CHAIR OLSON asked what the  difference was between common carrier                                                               
and contract carrier.                                                                                                           
MR. WRIGHT answered that contract  carriage would allow for 20 or                                                               
30  year commitments  in  order  to pay  off  bonds  that may  be                                                               
assumed. He said  the majority of pipelines in  other states were                                                               
contract carriage.                                                                                                              
4:25:58 PM                                                                                                                    
SENATOR MENARD asked  if there were any limitation  on the amount                                                               
of indebtedness.                                                                                                                
MR. WRIGHT  answered no.  He said  a lot was  going to  depend on                                                               
what would  happen during  the open season  process. He  said the                                                               
current  project estimate  was  $7.5 billion,  plus  or minus  30                                                               
SENATOR  MENARD asked  when the  earliest  would be  for an  open                                                               
MR.  WRIGHT answered  that an  open season  could occur  by July,                                                               
RENA  DELBRIDGE, Staff  for Representative  Hawker, Alaska  State                                                               
Legislature, Juneau, responded that  AGDC was scheduling its open                                                               
season to  start in early 2013  and continue through most  of the                                                               
4:27:28 PM                                                                                                                    
SENATOR MENARD asked about the need for a longer open season.                                                                   
MS. DELBRIDGE answered  that the intent was to  conclude the open                                                               
season  by December  of 2013  in  order to  determine if  secured                                                               
shipping commitments would fully support financing the project.                                                                 
4:28:12 PM                                                                                                                    
CHAIR OLSON asked what would  happen if shipping commitments were                                                               
not secured.                                                                                                                    
MS.  DELBRIDGE  responded  that sufficient  shipping  commitments                                                               
would be required to move the project forward.                                                                                  
4:28:45 PM                                                                                                                    
MR.  WRIGHT   said  Section   7  allowed   AGDC  to   enter  into                                                               
confidentiality agreements as necessary  to carry out its duties.                                                               
He said  municipalities and state  agencies would be  called upon                                                               
to provide non-hydrocarbon natural  resources at customary rates.                                                               
He said  state agencies  would be required  to issue  permits and                                                               
leases  at no  cost, except  for permits  and leases  through the                                                               
State  Pipeline  Coordinator's  Office.  He said  AGDC  would  be                                                               
required to bear  the usual and customary costs,  but costs would                                                               
not be  allowed to be rate  based. He said AGDC  would be allowed                                                               
state right-of-way  lease transferal  to another party  under the                                                               
same terms  and conditions via  the approval of  the Commissioner                                                               
of the Department of Natural Resources (DNR).                                                                                   
He  said  Section  8  revised  AGDC's  definition,  the  in-state                                                               
natural gas pipeline and natural gas pipeline.                                                                                  
He said Section 9 was  conforming language that dealt with right-                                                               
of-way leasing.  He said  Section 9, Section  10, Section  11 and                                                               
Section  12  were  conforming language  sections  to  match  with                                                               
Section 6.                                                                                                                      
4:30:06 PM                                                                                                                    
MR. WRIGHT  said Section  13 would limit  judicial review  of the                                                               
state lease permits or other  authorization decisions to superior                                                               
court  only and  prohibited the  courts from  granting injunctive                                                               
relief. He  said a court  that granted  relief must be  via final                                                               
judgment and  claims would have to  be brought within 60  days of                                                               
an action for which the relief was sought.                                                                                      
He said  Section 14 would  exempt information covered by  an AGDC                                                               
confidentiality agreement.                                                                                                      
CHAIR OLSON  addressed Section  13 and asked  why a  higher court                                                               
would not be allowed.                                                                                                           
MR. WRIGHT answered that judicial  review would start at superior                                                               
CHAIR  OLSON asked  if  the  superior court  would  be the  final                                                               
MR. WRIGHT answered  that the superior court would  have to issue                                                               
a final judgment  and could not grant injunctive  relief. He said                                                               
HB  9   was  modeled  after  the   Trans-Alaska  Pipeline  System                                                               
4:31:24 PM                                                                                                                    
MR. WRIGHT  said Section 14  would exempt information  covered by                                                               
an AGDC confidentiality agreement  from the Alaska Public Records                                                               
He  said Section  15  enabled  ANGDA to  act  as  a gas  marketer                                                               
instead of a transporter.                                                                                                       
SENATOR MENARD asked to confirm that ANGDA did not go away.                                                                     
MR. WRIGHT  answered that  ANGDA would  be under  AHFC's guidance                                                               
and the AHFC board would be the board for ANGDA and AGDC.                                                                       
4:33:04 PM                                                                                                                    
SENATOR MENARD  confirmed that the  change would be similar  to a                                                               
MR. WRIGHT answered yes.                                                                                                        
SENATOR  MENARD commented  that  ANGDA  did a  lot  of good  work                                                               
regarding licensing and permitting.                                                                                             
MR. WRIGHT  responded that ANGDA  had done some  preliminary work                                                               
that AGDC  would be able  to use as  a beneficial asset.  He said                                                               
ANGDA  was  originally setup  as  a  pipeline builder  and  those                                                               
responsibilities would be  deleted in HB 9. He said  ANGDA was an                                                               
active entity and HB 9 was  crafted to honor the voter initiative                                                               
and not do away with ANGDA.                                                                                                     
SENATOR  MENARD asked  if  the ANGDA  board  members would  still                                                               
4:34:02 PM                                                                                                                    
MR. WRIGHT  answered that the AHFC  board would act as  the ANGDA                                                               
CHAIR OLSON asked if this  was a voluntary subordination by ANGDA                                                               
to come under AHFC.                                                                                                             
MR. WRIGHT answered that Chair Olson  would have to ask the ANGDA                                                               
members. He said a recent  audit prescribed doing away with ANGDA                                                               
and  the  consensus  was  they  had some  assets  that  would  be                                                               
valuable to AGDC.                                                                                                               
CHAIR OLSON  asked if ANGDA  had privileges that might  be useful                                                               
to AGDC.                                                                                                                        
MR. WRIGHT answered correct.                                                                                                    
SENATOR MENARD  asked if ANGDA  would maintain their  same office                                                               
in downtown Anchorage.                                                                                                          
MR. WRIGHT answered that he did not know.                                                                                       
SENATOR  MENARD  mentioned that  the  ANGDA  board was  appointed                                                               
during the Palin administration.                                                                                                
MR. WRIGHT answered that the board was appointed in 2002.                                                                       
MS. DELBRIDGE responded  that the ANGDA board  members had cycled                                                               
through  different appointment  levels and  confirmed that  ANGDA                                                               
was created  by a voter initiative  in 2002. She said  one member                                                               
of the board  was a sponsor of the initiative  that created ANGDA                                                               
and was  still on  the board.  She said she  did not  believe the                                                               
board  was  at fully  functioning  numbers  due  to the  lack  of                                                               
appointments. She said HB 9  sponsors believe ANGDA would serve a                                                               
very critical purpose in a  gasline discussion going forward. She                                                               
said  if ANGDA  was  not  able to  serve  as  the marketing  arm,                                                               
another subsidiary  corporation would  have to  be created  to do                                                               
that. She said  ANGDA had already taken on some  of the marketing                                                               
functions to  try and work  with local utilities  in Southcentral                                                               
and the Railbelt to help  build cooperatives to arrange for space                                                               
on an  AGIA spur-line. She said  HB 9 was a  logical continuation                                                               
of some  of the  work that  ANGDA had been  involved with  and it                                                               
would  keep intact  all of  the  incredible work  that ANGDA  has                                                               
done, e.g., studying how propane  might be distributed throughout                                                               
rural Alaska on barges.                                                                                                         
4:36:49 PM                                                                                                                    
MR.  WRIGHT said  Section  16  clarified ANGDA's  role  as a  gas                                                               
He  said Section  17 allowed  ANGDA and  the DNR  Commissioner to                                                               
pledge state royalty gas for contracts entered into by ANGDA.                                                                   
He said Section 18 stated that  the AHFC board of directors would                                                               
serve as the ANGDA board of directors.                                                                                          
He said Section 19 was conforming  to Section 18 that allowed for                                                               
board member  per diem  and travel  expenses for  when conducting                                                               
ANGDA business.                                                                                                                 
He said  Section 20 included  legal counsel in the  services that                                                               
ANGDA  may contract  for and  exempted procurement  of contracted                                                               
services from the state procurement code.                                                                                       
He said  Section 21 removed  involvement with a project  from the                                                               
circumstances regarding disclosure.                                                                                             
He  said  Section  22   expanded  ANGDA's  existing  confidential                                                               
records  authority  to  include  information  in  a  confidential                                                               
agreement between ANGDA and AGDC.                                                                                               
4:38:21 PM                                                                                                                    
He said Section 23 removed  ANGDA's authority to exercise eminent                                                               
domain  as  ANGDA would  serve  as  a  marketing  arm and  not  a                                                               
pipeline builder.                                                                                                               
He said  Section 24 conformed  to Section 18 by  defining ANGDA'S                                                               
board as AHFC's board.                                                                                                          
4:39:25 PM                                                                                                                    
MR. WRIGHT said  Section 25 through Section 29  would implement a                                                               
new  regulatory  chapter  that  was  applicable  to  an  in-state                                                               
natural   gas    pipeline   authorized   to    provide   contract                                                               
He said Section 30 exempted an  AGDC project from state and local                                                               
property taxes during a pipeline construction period.                                                                           
He  said Section  31  repealed seven  statutes  and the  majority                                                               
pertained to  either the Joint In-State  Gasline Development Team                                                               
or ANGDA.                                                                                                                       
He said Section 32 repealed a  portion of the 2002 ballot measure                                                               
due to ANGDA's revised authority.                                                                                               
He said  Section 33  was transition  language that  expressed the                                                               
legislative  intent  that  existing right-of-way  leases  between                                                               
AGDC and  DNR were to  be amended  to reflect the  exemption from                                                               
common  carriage  covenants.  He  said  the  Alaska  Constitution                                                               
barred  the  legislature  from passing  laws  that  retroactively                                                               
applied to contracts in place.                                                                                                  
He said  Section 34  revised instruction and  Section 35  sets an                                                               
immediate effective date.                                                                                                       
4:41:30 PM                                                                                                                    
CHAIR  OLSON asked  for  an explanation  of  the exemptions  from                                                               
Section 28 for a common carrier.                                                                                                
MS.  DELBRIDGE answered  that AGDC  would operate  as a  contract                                                               
carrier with  a specified exemption from  potential regulation as                                                               
either a public utility or as a common carrier pipeline.                                                                        
CHAIR OLSON asked how the exemption would benefit the state.                                                                    
MS.  DELBRIDGE responded  that a  clear regulatory  process going                                                               
forward  with  limited  Regulatory  Commission  of  Alaska  (RCA)                                                               
involvement would allow  two parties to come together  and form a                                                               
contract. She said RCA would  judge contracts just and reasonable                                                               
if they  are in fact done  in a fair transaction,  without duress                                                               
or fraud.                                                                                                                       
CHAIR OLSON asked if it was two parties.                                                                                        
MS. DELBRIDGE  answered yes. She  said what Section 28  would not                                                               
provide for  was traditional cost  based regulation that  the RCA                                                               
would normally do.                                                                                                              
4:43:34 PM                                                                                                                    
CHAIR  OLSON asked  if  there was  nothing RCA  could  do if  two                                                               
parties agreed on a contract.                                                                                                   
MS.  DELBRIDGE  answered that  was  generally  correct. She  said                                                               
there were a few backstops.                                                                                                     
CHAIR OLSON asked about the backstops.                                                                                          
MS. DELBRIDGE responded that  negotiated agreements would require                                                               
RCA  approval.   She  said  approved  agreements   would  provide                                                               
regulatory  certainty to  the people  buying gas  and that  would                                                               
enable  AGDC  to continue  forward  to  get financing  and  start                                                               
construction. She  said RCA could  step in  if a contract  with a                                                               
public utility threatened public  health, safety and welfare. She                                                               
said a  partial certificate of  public convenience  and necessity                                                               
was created for RCA to go ahead  and issue for the carrier of the                                                               
gas pipeline.                                                                                                                   
4:45:35 PM                                                                                                                    
CHAIR OLSON asked if it was a federal certificate.                                                                              
MS.   DELBRIDGE  answered   no.   She  said   RCA  issued   state                                                               
certificates  and  it  was  a  finding  of  whether  or  not  the                                                               
applicant was fit,  willing and able to provide  the service that                                                               
was  in the  public's  interest, convenience  and necessity.  She                                                               
said this  was structured  due to AGDC  operating on  the state's                                                               
behalf  with a  mandate to  provide gas  at the  lowest rates  to                                                               
CHAIR OLSON asked  about the savings for the end  customer from a                                                               
contract carrier versus a common carrier.                                                                                       
MS.  DELBRIDGE  answered  that  the  majority  of  gas  pipelines                                                               
throughout the  Lower 48 were  contract carriers. She  noted that                                                               
the majority  of oil pipelines  were common carriers. She  said a                                                               
contract carrier  and a  gasline work  together because  gas goes                                                               
directly from  the producer to the  user. She said there  were no                                                               
big oil  storage tanks in a  hub that dispersed product  and firm                                                               
service  was required  without interruption.  She  said a  common                                                               
carriage  line was  essentially a  common service  where pipeline                                                               
space had to be made available  and current customers had to make                                                               
room. She said  power plants ran the risk of  not receiving their                                                               
gas if someone  else suddenly had a contract  that required their                                                               
gas to  be fed into  the common  carrier line. She  said contract                                                               
carriage lines were  important with the natural  gas pipeline and                                                               
firm  commitments to  transfer gas  for  10 or  20 years  without                                                               
interruption was the key to financing.                                                                                          
4:48:16 PM                                                                                                                    
CHAIR OLSON asked  if exporting Liquefied Natural  Gas (LNG) from                                                               
the pipeline was in the plans.                                                                                                  
MS. DELBRIDGE answered that there  was no LNG component. She said                                                               
the  pipeline terminated  where it  hooked into  the Southcentral                                                               
distribution grid  near Big Lake.  She said the  pipeline project                                                               
with Trans Canada  did include an LNG export  component. She said                                                               
an  LNG facility  would require  a  firm commitment  to meet  its                                                               
daily production requirements.                                                                                                  
CHAIR  OLSON  asked  if  a   common  carrier  would  more  easily                                                               
accommodate an LNG facility rather than a contract carrier.                                                                     
MS.  DELBRIDGE responded  that an  LNG facility  would require  a                                                               
direct link  from its  gas supplier  to efficiently  process gas.                                                               
She said  sharing the  pipeline with  in-state users  could cause                                                               
space efficiency issues and affect the cost of natural gas.                                                                     
4:50:42 PM                                                                                                                    
DANIEL    FAUSKE,   President,    Alaska   Gasline    Development                                                               
Corporation,  Anchorage, said  ANGDA  had one  employee and  that                                                               
individual would be  transferred to AGDC offices if  HB 9 passed.                                                               
He  said  AGDC had  27  employees  with the  majority  contracted                                                               
strictly for  the pipeline  project. He  said no  bureaucracy was                                                               
created in terms of ongoing operations.                                                                                         
He said one  of the difficulties in financing a  pipeline was due                                                               
to Alaska's  small population. He  said a pipeline  required long                                                               
term commitments from  utilities to finance the  project. He said                                                               
the proposed  gas pipeline  would be  financed via  revenue bonds                                                               
with  two layers  of  security provided  by  rating agencies  and                                                               
scrutiny by investors.  He said the bonds and debt  of AGDC would                                                               
be the bonds and debt of AGDC, not  of the state or AHFC. He said                                                               
AGDC's  bonding  authority  would  be  similar  to  the  Northern                                                               
Tobacco Securitization  Corporation (NTSC)  that was  formed from                                                               
the tobacco settlement  in 1998. He said AHFC was  called upon to                                                               
securitize and  capitalize the settlement.  He said  $300 million                                                               
in bonds  were sold  with the total  indebtedness solely  that of                                                               
NTSC, a  subsidiary of AHFC.  He said  the gas pipeline  would be                                                               
based upon the merits of  the business traction taking place with                                                               
investors and others involved in the project.                                                                                   
4:54:20 PM                                                                                                                    
MR. FAUSKE said  the pipeline funding plan would  require a 70/30                                                               
debt equity ratio. He said the  issuance of debt was cheaper than                                                               
financing  equity. He  said  the  rate of  return  on most  large                                                               
capital projects was  12 to 14 percent and the  best strategy was                                                               
to avoid a  "big player" to come  in and demand the  same rate of                                                               
return on  all of their  equity when  AGDC could be  selling much                                                               
cheaper  debt. He  said a  blended rate  at a  70/30 ratio  would                                                               
drive the  pipeline tariff  down and follow  HB 369's  mandate to                                                               
deliver gas  at the  lowest possible cost.  He said  state equity                                                               
participation  or ownership  was always  anticipated and  not the                                                               
operation of the pipeline to keep down tariffs.                                                                                 
MR. FAUSKE  said if  the state  were to  own the  pipeline, self-                                                               
regulation  via RCA  involvement would  add an  additional hurdle                                                               
and  increase financing  costs. He  said investors  want a  clear                                                               
path to their investment and  adding a regulatory body that could                                                               
step in  and potentially  alter cash flows  would impinge  on the                                                               
ability to issue debt.                                                                                                          
4:56:58 PM                                                                                                                    
He said  one of the project's  primary goals was to  beat pricing                                                               
of  imported  LNG  to  Alaska. He  said  the  current  calculated                                                               
pipeline delivery rate to Anchorage  was $9.93 per Thousand Cubic                                                               
Feet (MCF) and  Fairbanks was $10.45 per MCF. He  noted that both                                                               
rates  carried  a  plus-minus  factor  of  30  percent.  He  said                                                               
Fairbanks  was  currently paying  $23.33  per  MCF for  the  same                                                               
amount of British Thermal Units (BTU).                                                                                          
He  said the  pipeline's  pre-project planning  was  guided by  a                                                               
three stage approach  using the Front End  Loading (FEL) process.                                                               
He noted that the project was  currently in FEL-Stage 2 phase. He                                                               
said the  advantage of  FEL planning was  the ability  to address                                                               
project  feasibility constantly  and to  provide the  legislature                                                               
with pertinent information.                                                                                                     
4:58:28 PM                                                                                                                    
CHAIR OLSON asked what the imported LNG rates were.                                                                             
MR. FAUSKE answered  that the estimated rate was  between $12 and                                                               
$16  per MCF.  He  noted that  utilities  were having  difficulty                                                               
negotiating LNG contracts beyond two years.                                                                                     
CHAIR OLSON  commented that imported  LNG selling at $14  per MCF                                                               
was close to the projected pipeline  price of $10.45 per MCF when                                                               
the 30 percent plus-minus factor was taken into account.                                                                        
MR. FAUSKE  responded that  was correct.  He said  the plus-minus                                                               
factor would  decrease to 10  percent when the  project proceeded                                                               
to FEL-Stage 3.                                                                                                                 
JOE   DUBLER,   Vice   President,  Alaska   Gasline   Development                                                               
Corporation, Anchorage, said the  imported LNG and pipeline rates                                                               
were not  comparable and noted that  the $14 to $16  per MCF rate                                                               
for LNG did  not include delivery costs to Fairbanks.  He said an                                                               
open  season  failure  without enough  commitments  to  fill  the                                                               
pipeline would lead to project abandonment.                                                                                     
5:00:59 PM                                                                                                                    
MR.  FAUSKE said  total state  funding for  the project  was $400                                                               
million  to  get to  an  open  season.  He said  the  legislature                                                               
reserved $200  million for the  project in 2011, $21  million was                                                               
in the  Governor's current capital  budget and $28.2  million had                                                               
recently  been received.  He said  the project  would be  revenue                                                               
bond  funded and  the  state  would not  outlay  $7.5 billion  in                                                               
capital.  He  said  pipeline   companies  indicated  interest  in                                                               
project  bidding  if  the  state  spent  the  money  required  to                                                               
determine project viability.                                                                                                    
5:02:25 PM                                                                                                                    
SENATOR WAGONER  asked if funding,  private operator entry  or an                                                               
LNG  manufacturer could  be determined  after  a successful  open                                                               
MR. FAUSKE answered yes.                                                                                                        
SENATOR WAGONER  responded that he  wanted everyone to  know that                                                               
AGDC was  not saying it  was going to  do this and  proceed right                                                               
through the process.                                                                                                            
MR. FAUSKE answered that was absolutely correct.                                                                                
MR.  DUBLER responded  that HB  9 would  give AGDC  the power  to                                                               
determine the appropriate ownership  and bonding for the pipeline                                                               
5:03:22 PM                                                                                                                    
MR. FAUSKE said  AGDC had completed a great deal  of work and the                                                               
draft for  the Environmental  Impact Statement  (EIS) was  in the                                                               
hands of the U.S. Army Corps  of Engineers. He noted that the EIS                                                               
would be  completed by May or  June. He said the  transfer of the                                                               
state  right-of-way  had  occurred  with  AHFC  and  HB  9  would                                                               
continue the  transfer. He said the  federal government announced                                                               
that they were  prepared and had enough information  to issue the                                                               
federal right-of-way. He  said he was proud of the  fact that the                                                               
state had  never been this far  in reference to the  pipeline and                                                               
noted an estimated 2,200 permits  were currently required for the                                                               
5:04:12 PM                                                                                                                    
CHAIR OLSON asked how many permits were completed by AGDC.                                                                      
MR. DUBLER answered not many. He said AGDC was still going                                                                      
through the regulatory work.                                                                                                    
MR. FAUSKE commented  that AGDC had a  great working relationship                                                               
with native corporations  and people would be put to  work on the                                                               
project. He said a 737 mile  long pipeline would deliver a lot of                                                               
gas to the state.                                                                                                               
CHAIR OLSON [announced that HB 9 would be held.]                                                                                
5:04:55 PM                                                                                                                    
There being no further business to come before the committee,                                                                   
Chair Olson adjourned the Senate Community and Regional Affairs                                                                 
Committee meeting at 5:04 p.m.                                                                                                  

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