Legislature(2003 - 2004)
03/10/2004 09:05 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 241
"An Act making an appropriation to the Alaska Natural Gas
Development Authority; and providing for an effective date."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken stated this bill "makes an appropriation to the
Department of Revenue for the analysis and design of a natural gas
pipeline."
JOE BALASH, Staff to Senator Gene Therriault, recalled discussions
at the previous hearing about the language of Section 1 of this
bill. Senator Therriault had asked that the language be relatively
broad to allow the Department of Revenue the flexibility to work on
gas line issues extending beyond the Alaska Natural Gas Development
Authority (ANGDA). In a previous hearing the Committee had
questioned the appropriation lapse date of 2009. Senator Therriault
is willing to adjusting the lapse date to 2005, as it is expected
that the Department of Revenue would complete the analysis provided
for in this bill by FY 05.
Mr. Balash stated for the record that the ANGDA Board of Directors
endorsed the appropriation this bill would provide the Department
of Revenue and passed a resolution, which reads the following.
The Board of the Alaska Natural Gas Development Authority
supports the appropriation of three million dollars in the
remainder of FY 04 to the Department of Revenue for work
related to bringing North Slope gas to market.
STEVEN PORTER, Deputy Commissioner, Department of Revenue,
testified via teleconference from Anchorage and referenced a
spreadsheet titled, "Projected Gas Budget for FY 04 and 05" [copy
on file]. He reviewed the spreadsheet. He explained that even
though the spreadsheet outlines total project costs of $3.7
million, the Department of Revenue is only requesting three million
dollars because certain contracts may not occur, and reimbursement
agreements may be obtained for the remaining contracts. The
Stranded Gas Act contemplates the possibility of negotiating a
reimbursement agreement with a party, but does not require a
reimbursement. In addition, certain aspects of the contracts, such
as in-state gas use, certain State research, and social impacts may
be standard in all three contracts. ANGDA would benefit from much
of the study work completed on the applications.
Senator Hoffman asked why the lapse date for this legislation is
2009 instead of 2005 considering the appropriation to the
Department of Revenue would be expended in FY 05.
Mr. Porter expressed willingness to shorten the lapse date to the
year 2005, although the speed in which the negotiations would occur
could not be predicted. The intent is to complete negotiations by
the end of fiscal year 2005.
HAROLD HEINZE, Chief Executive Officer, Alaska Natural Gas
Development Authority, testified via teleconference from Anchorage
that this legislation has evolved to combine funds to address all
natural gas projects and issues. The funds requested through this
legislation would be utilized to accomplish all the goals of the
Authority; the work to be completed by ANGDA would focus on ANGDA's
business structure, financial structure and tax status. This effort
is important because ANGDA might play a roll in working with the
projects detailed in this legislation, and become an aggregator for
local utilities in the State. ANGDA must have an understanding of
its business standing and structure because it could be handling
large financial transactions in the future.
Mr. Heinze added that ANGDA has requested funds in the FY 05
operating budget for the ANGDA staff, the Board of Directors and
other administrative functions totaling approximately $200,000 to
$250,000. The majority of the projects ANGDA has contemplated are
included in the comparative analysis provided for in this
legislation. The State has a series of important issues to consider
in negotiating a gas pipeline project such as cost estimates,
tariff calculations, benefits and markets. This analysis would
provide ANGDA with information vital to the feasibility
determination, and would determine what interaction ANGDA might
have with the other applicants. Lastly, this analysis would aide
ANGDA in documenting the benefits North Slope gas would provide to
the State.
Mr. Heinze indicated that the ANGDA Board was aware ANGDA would be
considered with three other applicants in the analysis this
legislation would provide. Though this analysis would not grant
ANGDA an ideal level of funding; by participating, ANGDA would
obtain information necessary to fulfill the role intended by
voters.
Senator B. Stevens asked if the port authority contract is a valid
proposal.
Mr. Porter replied that the State is still making that
determination.
Senator B. Stevens referenced the "Projected Gas Budget for FY 04
and 05" spreadsheet and asked why no expenses are planned for the
negotiation of a contract with the MidAmerican Energy Holdings
Company in FY 05. He asked if the Department anticipates
reimbursement for expenses incurred in this effort.
Mr. Porter responded that MidAmerican's intent is to complete a
contract before the end of FY 04.
Senator B. Stevens suggested that the funds requested for FY 04
expenditures be included in a supplemental appropriation and the
funds requested for FY 05 expenditures be included in the FY 05
operating budget.
Amendment #1: This amendment reduces the general fund appropriation
from $3 million to $2 million to the Department of Revenue for work
related to bringing natural gas from the North Slope to market, on
page 1, line 4 of the committee substitute.
Senator B. Stevens moved for adoption.
Co-Chair Wilken objected for an explanation.
Senator B. Stevens affirmed that there is an immediate need for an
appropriation of one million dollars to the Department of Revenue,
but there is not an immediate need for the FY 05 appropriation.
Including the FY 05 expenditures in the FY 05 operating budget
would allow the State time to determine whether the port authority
contract is valid and provide a more complete explanation of the
expenditures outlined in the "Comparative Analysis/Energy Bill and
Other Proposals/Issues" spreadsheet. Ample time exists to address
these appropriations, and include them in the standard government
budget process.
Senator Hoffman asked if Senator B. Stevens would also change
Section 2 of the committee substitute.
Senator B. Stevens stated that if Amendment #1 were adopted he
would consider offering an amendment to change the lapse date of
the appropriation from 2009 to 2005.
Co-Chair Wilken clarified that if Amendment #1 passes one million
dollars would be offered as a supplemental amendment to the FY 04
operating budget.
Senator B. Stevens replied that if this legislation is adopted it
would take affect immediately. Sufficient time exists to include
the FY 04 expenditures in the supplemental amendment to the FY 04
operating budget and make that funding available upon passage of
this bill. Additionally, if this amendment passes the lapse date of
this appropriation would need to be adjusted to 2005 to coordinate
with the second and last appropriation in FY 05.
Co-Chair Wilken asked how the additional $2.7 million would be
appropriated if it were considered necessary.
Senator B. Stevens responded that an allocation would be included
in the FY 05 operating budget.
Co-Chair Wilken clarified that these funds would need to be
included in the calculations of the existing FY 05 operating budget
draft.
Senator B. Stevens remarked that the Department of Revenue would be
required to justify the need for the expenditure and the funds
would then be appropriated through the FY 05 operating budget. In
using the traditional budget process to appropriate funds the
legislature would be following the directives of the Office of the
Governor.
Senator Bunde spoke in favor of the amendment. He acknowledged the
legitimacy of ANGDA, but noted that for twelve years people have
complained of "too much government, too much bureaucracy and too
much spending". The State has put significant amounts of money into
the promotion of private enterprise without receiving any positive
return. The amount of funds expended for this effort should be
minimized because a positive return is unlikely. An FY 05 operating
budget allocation should not be granted.
Senator Hoffman also supported the amendment because it would allow
time for additional scrutiny of the appropriation. The
documentation is minimal, and a discrepancy exists between the
costs projected by the Department of Revenue and the requested
appropriation. One million dollars should be adequate to meet
ANGDA's need for immediate funding.
A roll call was taken on the motion.
IN FAVOR: Senator Olson, Senator B. Stevens, Senator Bunde, Senator
Hoffman, and Co-Chair Green
OPPOSED: Co-Chair Wilken
ABSENT: Senator Dyson
The motion PASSED (5-1-1)
The amendment was ADOPTED.
Amendment #2: This amendment changes the lapse date of the
appropriation made in this legislation from June 30, 2009 to June
30, 2005, in Section 2 on page 1, line 7 of the committee
substitute.
Senator B. Stevens moved for adoption.
Co-Chair Wilken objected for an explanation.
Senator B. Stevens asserted that 16 to 18 months is an adequate
amount of time to complete negotiations. Furthermore, the Authority
would have an opportunity to request additional funds if necessary.
SFC 04 # 36, Side A 10:46 AM
Senator B. Stevens continued that this project might be ongoing.
Rather than making a fund source available for five years, the
legislature should review and appropriate funds as needed on an
annual basis.
Co-Chair Wilken withdrew his objection.
The amendment was ADOPTED without objection.
PAUL FUHS, Backbone2, explained the organization he represents.
Backbone2 is the continuation of Backbone1, which was a group of
Alaskan citizens that spoke against BP's efforts to take over
ARCO's assets in Alaska, and of the concerns over the monopoly that
that takeover would create. Backbone2 is a nonpartisan organization
whose membership includes former governors, former legislators,
current legislators, and Alaskan citizens who are in support of the
"expeditious development" of a gas pipeline. Backbone2 is in
support of SB 241. Mr. Fuhs thanked Senator Therriault for his
political leadership and for respecting the gas pipeline issues the
voters supported in the last statewide election.
Mr. Fuhs asserted that decisions made on gas pipeline development
are very important to the economy of the State. He referred to a
document prepared by Backbone2 titled, "Alaska's Strategic
Interests in North Slope Gas Development" [copy on file], and
defined it as a fair, and complex statement of the State's gas
pipeline issues. He stated that much economic misinformation has
been intentionally disseminated regarding the gas pipeline project
proposals. In conducting the proposed gas pipeline contract
analysis ANGDA and the Department of Revenue would confirm the
actual economic impacts of the various gas pipeline contracts. The
gas pipeline would be "the long term fiscal plan for Alaska." The
State revenues Governor Murkowski envisioned as result of resource
development can only be achieved through the construction of a gas
pipeline; there are no resource development projects that could
produce greater State revenue. Two independent investment-banking
firms have determined that ANGDA's gas pipeline project could
produce annual revenues of up to one billion dollars for the State
of Alaska. ANGDA's gas pipeline proposal takes the best interest of
the State and its citizens into consideration, whereas other
project applicants are asking for more concessions from the State.
Mr. Fuhs asserted that the "government should only do things when
the private sector cannot." The State has waited for the private
sector to build a gas pipeline for thirty years, and it is time
that the government takes action, especially given the
"dysfunctional" relationships that have developed between the
companies operating on the North Slope. MidAmerican has offered a
serious gas pipeline project proposal; a partnership between ANGDA
and MidAmerican could prove successful.
Mr. Fuhs emphasized the organization's support of this legislation
and Amendment #1.
Mr. Porter informed that the Department of Revenue frequently
authorizes projects one year before the necessary funding would be
available. However, these gas pipeline contracts could not be
authorized until funding is received. Amendment #1 would delay the
Department in granting contracts. He requested that additional
funds be made available to the Department of Revenue in FY 04.
Co-Chair Wilken pointed out that further consideration of this
matter could be undertaken when this bill is heard in the House of
Representatives. He clarified that Senator B. Stevens' intent in
proposing Amendment #1 was to isolate FY 04 expenditures, both
expenses and encumbrances.
Mr. Porter replied he would provide the necessary information to
Senator B. Stevens.
Co-Chair Green offered a motion to report the bill from Committee
as amended with individual recommendations.
There was no objection and CS SB 241 (FIN) MOVED from Committee.
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