Legislature(2007 - 2008)SENATE FINANCE 532

05/10/2007 01:30 PM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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+= SB 104 NATURAL GAS PIPELINE PROJECT TELECONFERENCED
Moved CSSB 104(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                                                                                                                                
     CS FOR SENATE BILL NO. 104(FIN)                                                                                            
     "An  Act  relating to  the  Alaska  Gasline Inducement  Act;                                                               
     providing inducements for the  construction of a natural gas                                                               
     pipeline  and shippers  that commit  to  use that  pipeline;                                                               
     establishing  the  Alaska  Gasline Inducement  Act  matching                                                               
     contribution   fund;  providing   for   an  Alaska   Gasline                                                               
     Inducement  Act coordinator;  making conforming  amendments;                                                               
     and providing for an effective date."                                                                                      
                                                                                                                                
                                                                                                                                
This was  the 20th hearing  for this  bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
6:24:56 PM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman  move to adopt the  Finance committee substitute                                                               
Version 25-GS1060\T, Bullock, dated May  10, 2007, as the working                                                               
document.                                                                                                                       
                                                                                                                                
Without  objection,  the  Version "T"  committee  substitute  was                                                               
ADOPTED as the working document.                                                                                                
                                                                                                                                
6:25:24 PM                                                                                                                    
                                                                                                                                
               Chapter 90. Alaska Gasline Inducement Act.                                                                       
                                                                                                                                
STEVE  PORTER,  Staff  to Senator  Bert  Stedman,  discussed  the                                                               
changes  the  Version  "T" committee  substitute  would  make  to                                                               
provisions of  Chapter 90,  added to  AS 43 by  Section 1  of the                                                               
bill.                                                                                                                           
                                                                                                                                
     Article 2. Alaska Gasline Inducement Act License.                                                                          
                                                                                                                                
          Section 43.90.110. Natural gas pipeline project                                                                       
          construction inducement.                                                                                              
                                                                                                                                
Mr.  Porter stated  that  the  first change  in  Version "T",  as                                                               
compared  to the  previous Finance  committee substitute  Version                                                               
25-GS1060\N,  was  in  Article 2,  Section  43.90.110  subsection                                                               
(a)(1).  The words  "in  the form  of  reimbursements" was  added                                                               
following "contributions" on page 2, line 17.                                                                                   
                                                                                                                                
6:26:25 PM                                                                                                                    
                                                                                                                                
MARCIA  DAVIS,   Deputy  Commissioner,  Department   of  Revenue,                                                               
informed  the  Committee  that   this  "technical"  change  would                                                               
strengthen  language   pertaining  to  the  $500   million  grant                                                               
reimbursement monies  provided by the  State to the  licensee. It                                                               
would require  "adequate support and identification  of the costs                                                               
before  monies are  provided  for  that particular  expenditure".                                                               
Requesting  "reimbursement monies  for an  expenditure that  does                                                               
not meet the qualifications as  a qualified expenditure" would be                                                               
a violation.                                                                                                                    
                                                                                                                                
6:28:36 PM                                                                                                                    
                                                                                                                                
Mr.  Porter  noted  that  the  word  "match"  was  replaced  with                                                               
"reimburse" in two sections of  Section 43.90.110: page 2 line 24                                                               
of  subsection  (a)(1)(A)  and  page  2  line  29  of  subsection                                                               
(a)(1)(B). This change would  further clarify provisions relating                                                               
to qualified expenditures.                                                                                                      
                                                                                                                                
Mr.  Porter   also  noted  that   the  language   "pursuing  firm                                                               
transportation commitments in a  binding open season, to securing                                                               
financing for the project, or"  was inserted following the phrase                                                               
"reasonably related  to" in subsection  (a)(1)(C), page 3  line 4                                                               
of  this  section,  in  order "to  expand"  the  activities  "the                                                               
licensee  could actually  perform  during" the  five year  period                                                               
immediately following receipt of the license.                                                                                   
                                                                                                                                
6:29:56 PM                                                                                                                    
                                                                                                                                
Senator Dyson  asked whether changing  from a  matching situation                                                               
to a  reimbursement scenario,  as specified  by the  revisions to                                                               
Section  43.90.110, subsections  (a)(1)(A)  and  (B), would  have                                                               
"the affect of  cutting in half the amount of  money for the work                                                               
that would be done during this period."                                                                                         
                                                                                                                                
          (1)   subject   to    appropriation,   state   matching                                                               
     contributions  in  the form  of  reimbursements  in a  total                                                               
     amount  not to  exceed  $500,000,000, paid  to the  licensee                                                               
     during the  five-year period immediately following  the date                                                               
     the license is awarded;…                                                                                                   
                                                                                                                                
Ms. Davis  identified "the  actual language  change" as  being in                                                               
subsection  (a)(1), page  2 lines  17  through 19.  She read  the                                                               
language and expressed the following.                                                                                           
                                                                                                                                
     …the actual  matching percentage  is still  in play.  So, if                                                               
     they  say,  I want  a  match  prior  to  open season  of  40                                                               
     percent, it would  be a reimbursement up to  the 40 percent.                                                               
     So the percentage level of match  is still in play. The only                                                               
     thing  that  the addition  of  the  word reimburse  does  is                                                               
     affect the timing, so that  the State isn't paying the match                                                               
     at the  initial outlay of  cash by that licensee  but rather                                                               
     its   after  they've   outlaid,  provided   the  documentary                                                               
     support,  then we  provide  the  reimbursement that's  still                                                               
     subject to those caps of percentages.                                                                                      
                                                                                                                                
Senator Dyson appreciated the clarification.                                                                                    
                                                                                                                                
6:31:31 PM                                                                                                                    
                                                                                                                                
     Section 43.90.130. Application requirements.                                                                               
                                                                                                                                
Mr. Porter  next directed attention  to paragraph (1)  of Section                                                               
43.90.130,  page  3  beginning  on   line  26.  The  phrase  "the                                                               
applicant shall file with the  commissioners the number of copies                                                               
of the application, and any  amended application, required by the                                                               
commissioners; at the same time  the copies of the application or                                                               
an  amended application  are filed  with  the commissioners,  the                                                               
applicant shall provide six copies  of the application or amended                                                               
application  to the  presiding  officer of  each  chamber of  the                                                               
legislature" was  added following  "request for  applications" in                                                               
paragraph (1), page 3 line 31.                                                                                                  
                                                                                                                                
6:32:21 PM                                                                                                                    
                                                                                                                                
     Section 43.90.160. Notice, review, and comment.                                                                            
                                                                                                                                
          (c) After the commissioners determine that the                                                                        
     applications are complete under AS 43.90.140, ….                                                                           
                                                                                                                                
Mr.  Porter advised  that the  change in  subsection (c)  of this                                                               
section was  to pluralize "the  application is complete"  to read                                                               
"the applications are complete", as reflected on page 12 line 3.                                                                
                                                                                                                                
Ms.  Davis  noted  that  this language  had  been  pluralized  in                                                               
previous versions of  the bill. Changing it from  the singular to                                                               
the  plural recognized  that all  license  applications would  be                                                               
received at one time rather than at staggered times.                                                                            
                                                                                                                                
6:34:07 PM                                                                                                                    
                                                                                                                                
     Section 43.90.170. Application evaluation and ranking.                                                                     
                                                                                                                                
          (b) When evaluating the net present value of                                                                          
     anticipated  cash flow  to the  state  from the  applicant's                                                               
     project   proposal,   the   commissioners   shall   use   an                                                               
     undiscounted  value and,  at a  minimum,  discount rates  of                                                               
     two, five, six, and eight percent, and consider                                                                            
                                                                                                                                
Mr.  Porter stated  that the  discount  rate of  six percent  was                                                               
added to subsection (b) page 12 line 20.                                                                                        
                                                                                                                                
6:34:49 PM                                                                                                                    
                                                                                                                                
     Section 43.90.200. Certification by regulatory authority                                                                   
     and project sanction.                                                                                                      
                                                                                                                                
          (a) A licensee that is awarded a certificate of public                                                                
     convenience  and necessity  from  a  regulatory agency  with                                                               
     jurisdiction over  the project shall accept  the certificate                                                               
     on or before the date  the order granting the certificate is                                                               
     no longer subject to judicial review.                                                                                      
                                                                                                                                
6:35:43 PM                                                                                                                    
                                                                                                                                
Mr. Porter  stated that, as  a clarifying measure, the  words "on                                                               
or before the  date" were added following the  first reference to                                                               
"the certificate"  in subsection  (a) page 15  line 4.  The words                                                               
"or earlier at the licensee's  discretion" were deleted following                                                               
"judicial review" at the end of the subsection, page 15 line 5.                                                                 
                                                                                                                                
Mr.  Porter  informed  the  Committee   that  the  term  "amended                                                               
certificate" was utilized throughout  the previous version of the                                                               
bill. That term is deleted  entirely from Version "T" by changing                                                               
the definition  of certificate to  include "both  certificate and                                                               
language  sufficient  to  cover  amended  certificate  as  well."                                                               
Further discussion on this change would be forthcoming.                                                                         
                                                                                                                                
          (f) In this section, "effective date of the                                                                           
     certificate of  public convenience and necessity"  means the                                                               
     earlier of  the date the  order granting the  certificate is                                                               
     not  longer  subject to  judicial  review  or the  date  the                                                               
     licensee accepts the certificate.                                                                                          
                                                                                                                                
Mr. Porter advised  that two changes were made  to subsection (f)                                                               
of  this  section.  The  words "the  earlier  of"  were  inserted                                                               
following "means"  on page 16 line  3 and the words  "or the date                                                               
the  licensee  accepts  the  certificate"  were  added  following                                                               
"review" on line 4.                                                                                                             
                                                                                                                                
6:37:30 PM                                                                                                                    
                                                                                                                                
          (e) The transfer and assignments under (d) of this                                                                    
     section as a result of failure  to comply with (a) or (b) of                                                               
     this section  are at  no cost  to the  state or  the state's                                                               
     designee.  A transfer  under (c)  of this  section shall  be                                                               
     subject to  the state's payment  to the licensee of  the net                                                               
     amount  of expenditures  incurred and  paid by  the licensee                                                               
     that  are  qualified expenditures  for  the  purposes of  AS                                                               
     43.90.110.                                                                                                                 
                                                                                                                                
Ms.  Davis advised  that the  phrase  "is at  the licensee's  net                                                               
cost" were  deleted and  replaced with "shall  be subject  to the                                                               
state's  payment   to  the   licensee  of   the  net   amount  of                                                               
expenditures  incurred   and  paid  by  the   licensee  that  are                                                               
qualified expenditures"  following "A transfer under  (c) of this                                                               
section" on page 15 line 30.                                                                                                    
                                                                                                                                
6:38:17 PM                                                                                                                    
                                                                                                                                
     Section  43.90.210.  Amendment  of or  modification  to  the                                                               
     project plan. Subject to the  approval of the commissioners,                                                               
     a  licensee may  amend or  modify  its project  plan if  the                                                               
     amendments or  modifications improve  the net  present value                                                               
     of the  project to  the state, are  necessary because  of an                                                               
     order   or  requirement   by   a   regulatory  agency   with                                                               
     jurisdiction over the  project or by the Alaska  Oil and Gas                                                               
     Conservation  Commission, or  the amendment  or modification                                                               
     is necessary  because of  changed circumstances  outside the                                                               
     licensee's  control and  not  reasonably foreseeable  before                                                               
     the  license  was  issued.   An  amendment  or  modification                                                               
     approved  under this  section must  be  consistent with  the                                                               
     requirements of  AS 43.90.130 and,  except for  an amendment                                                               
     or modification required because  of an order or requirement                                                               
     of a  regulatory agency with  jurisdiction over  the project                                                               
     or by  the Alaska Oil  and Gas Conservation  Commission, may                                                               
     not substantially diminish  the value of the  project to the                                                               
     state or the project's likelihood of success.                                                                              
                                                                                                                                
Mr.  Porter  informed  that  the words  "an  order  issued"  were                                                               
deleted following "jurisdiction  over the project or"  on page 16                                                               
lines 9 and 15 of this section.                                                                                                 
                                                                                                                                
Ms Davis advised  that the phrase "net present"  was also deleted                                                               
following "may not  substantially diminish the" on  line 16. This                                                               
phrase was inadvertently included in  the previous version of the                                                               
bill as the result of a technical drafting error.                                                                               
                                                                                                                                
6:39:33 PM                                                                                                                    
                                                                                                                                
     Section 43.90.220.  Records, reports, conditions,  and audit                                                               
     requirements.                                                                                                              
                                                                                                                                
               (2) receive all relevant notices when and as                                                                     
     issued and  information when  and as  sent to  the governing                                                               
     body or bodies and equity holders;                                                                                         
                                                                                                                                
Mr. Porter stated  that the words "when and as"  were inserted in                                                               
subsection (d)(2), page 17 line 4, of this section.                                                                             
                                                                                                                                
6:40:03 PM                                                                                                                    
                                                                                                                                
     Section 43.90.240. Abandonment of project.                                                                                 
                                                                                                                                
          (b) If the commissioners and the licensee do not agree                                                                
     that the  project is uneconomic,  the disagreement  shall be                                                               
     settled by arbitration administered by…..                                                                                  
                                                                                                                                
Mr. Porter stated that the phrase  "or the licensee find that the                                                               
project  is  uneconomic  and  the  other  parties  disagree"  was                                                               
deleted  and  replaced  with  "and the  licensee  do  not  agree"                                                               
following "commissioners"  on page 18  line 26 of  subsection (b)                                                               
of  this section  in  order to  clarify  that "commissioners  and                                                               
licensees don't make findings, they disagree".                                                                                  
                                                                                                                                
6:40:51 PM                                                                                                                    
                                                                                                                                
               Article 3. Resource Inducements.                                                                                 
                                                                                                                                
     Section 43.90.300. Qualification for resource inducements.                                                                 
                                                                                                                                
Mr. Porter  stated that the  word "inducement" was  pluralized to                                                               
"inducements" on page 20, line 27 of the section title.                                                                         
                                                                                                                                
     Section 43.90.310. Royalty inducement.                                                                                     
          (c) To claim the inducement under (b) of this section,                                                                
     a lessee or other person  qualified under AS 43.90.300 shall                                                               
     agree, on an application form  provided by the Department of                                                               
     Natural Resources, that the lessee  or other person, and the                                                               
     lessee's or other  person's affiliates, successors, assigns,                                                               
     and  agents will  not  protest  or appeal  a  filing by  the                                                               
     licensee to roll in expansion costs  of the mainline up to a                                                               
     level that  is required  in AS  43.90.130(7) if  the Federal                                                               
     Energy  Regulatory Commission  does  not  have a  rebuttable                                                               
     presumption in  effect that  rolled-in treatment  applies to                                                               
     the cost of the expansion  of the project. The agreement not                                                               
     to protest may  not preclude the lessee or  other person, or                                                               
     the  lessee's  or  other  person's  affiliates,  successors,                                                               
     assigns,  and agents  from protesting  a filing  to roll  in                                                               
     mainline expansion  costs that  licensee is not  required to                                                               
     propose and support under AS 43.90.130(7).                                                                                 
                                                                                                                                
     Section 43.90.320. Gas production tax exemption.                                                                           
          (c) The person claiming the exemption under this                                                                      
     section  shall  agree  that the  person,  and  the  person's                                                               
     affiliates,  successors,   assigns,  and  agents   will  not                                                               
     protest  or appeal  a  filing  by the  licensee  to roll  in                                                               
     mainline expansion costs  up to the level  that the licensee                                                               
     is required to  propose an support under  AS 43.90.130(7) if                                                               
     the  Federal Energy  Regulatory Commission  does not  have a                                                               
     rebuttable  presumption in  effect that  rolled-in treatment                                                               
     applies to  the cost  of the expansion  of the  project. The                                                               
     agreement required  under this  subsection may  not preclude                                                               
     the   person,  or   the  person's   affiliates,  successors,                                                               
     assigns, and  agents, from  protesting a  filing to  roll in                                                               
     mainline expansion  costs that  licensee is not  required to                                                               
     propose and support under AS 43.90.130(7).                                                                                 
                                                                                                                                
     Section 43.90.330. Inducement vouchers.                                                                                    
          (d) A person that receives a voucher under this                                                                       
     section   and  a   gas  producer   that  receives   resource                                                               
     inducements under a voucher shall  agree that the person and                                                               
     the   gas   producer   and  their   respective   affiliates,                                                               
     successors, assigns, or agents will  not protest or appeal a                                                               
     filing by  the licensee to roll-in  mainline expansion costs                                                               
     up to  the level  that the licensee  is required  to propose                                                               
     and  support under  AS 43.90.130(7)  if  the Federal  Energy                                                               
     Regulatory   Commission   does   not   have   a   rebuttable                                                               
     presumption in  effect that  rolled-in treatment  applies to                                                               
     the  cost of  the expansion  of the  project. The  agreement                                                               
     required under  this subsection may not  preclude the person                                                               
     or gas producer or  their respective affiliates, successors,                                                               
     assigns,  or  agents from  protesting  a  filing to  roll-in                                                               
     mainline expansion  costs that the licensee  is not required                                                               
     to propose and support under AS 43.90.130(7).                                                                              
                                                                                                                                
Mr.  Porter  stated  that  the  clause  "if  the  Federal  Energy                                                               
Regulatory Commission  does not have a  rebuttable presumption in                                                               
effect  that  rolled-in treatment  applies  to  the cost  of  the                                                               
expansion of the project." has  been inserted following the first                                                               
reference to "AS 43.90.130(7)" in  three subsections of the bill:                                                               
Section 43.90.310.  Royalty inducement., subsection (c),  page 23                                                               
line  8;  Section  43.90.320.   Gas  production  tax  exemption.,                                                               
subsection  (c),   page  24,  line  9;   and  Section  43.90.330.                                                               
Inducement vouchers., subsection (d), page 25 line 9.                                                                           
                                                                                                                                
          Article 4. Miscellaneous Provisions.                                                                                  
                                                                                                                                
     Section  43.90.400. Alaska  Gasline Inducement  Act matching                                                               
     contribution fund; disbursements; audits.                                                                                  
                                                                                                                                
          (c) The commissioners shall adopt regulations that                                                                    
     provide  for application  to receive  matching contributions                                                               
     in the form of reimbursements  for qualified expenditures as                                                               
     provided under AS 43.90.110, and ……                                                                                        
                                                                                                                                
Mr. Porter stated that the phase "in the form of reimbursements"                                                                
was inserted following "contributions" in subsection (c) page 25                                                                
line 30 of Section 43.90.400.                                                                                                   
                                                                                                                                
6:43:14 PM                                                                                                                    
                                                                                                                                
     Section 43.90.440. Licensed project assurances.                                                                            
                                                                                                                                
          (a) Except as otherwise provided in this chapter, the                                                                 
     state  grants a  licensee assurances  that the  licensee has                                                               
     exclusive enjoyment  of the inducements provided  under this                                                               
     chapter before the commencement of commercial operations….                                                                 
                                                                                                                                
Mr. Porter pointed out that the word "operation" in Section                                                                     
43.90.440, subsection (a) page 26 line 22 was pluralized to                                                                     
"operations" in this version of the bill.                                                                                       
                                                                                                                                
6:43:32 PM                                                                                                                    
                                                                                                                                
               Article 5. General Provisions.                                                                                   
                                                                                                                                
     Section 43.90.900. Definitions.                                                                                            
                                                                                                                                
               (4)"certificate   of    public   convenience   and                                                               
     necessity" and  "certificate" mean  a certificate  of public                                                               
     convenience  and  necessity  issued by  the  Federal  Energy                                                               
     Regulatory  Commission  or   the  Regulatory  Commission  of                                                               
     Alaska,  and   a  certificate   of  public   convenience  of                                                               
     necessity   issued   by   the  Federal   Energy   Regulatory                                                               
     Commission under 15  U.S.C. 719 et seq.  (Alaska Natural Gas                                                               
     Transportation Act of  1976) that is amended  to comply with                                                               
     the terms of the license;                                                                                                  
                                                                                                                                
Mr. Porter stated that, as mentioned earlier, the definitions of                                                                
"certificate   of   public   convenience   and   necessity"   and                                                               
"certificate"  were changed  to accommodate  the deletion  of the                                                               
term "amended  certificate" from this  version of the  bill. This                                                               
definition is depicted in paragraph  (4), page 28 line 31 through                                                               
page 29 line 5, of Section 43.90.900.                                                                                           
                                                                                                                                
6:44:55 PM                                                                                                                    
                                                                                                                                
               (17) "open season" means the process that                                                                        
     complies with  18 C.F.R. Part  157, Subpart B  (Open Seasons                                                               
     for Alaska  Natural Gas Transportation Projects)  or similar                                                               
     procedures for soliciting  commitments for pipeline capacity                                                               
     under the  regulations, policies, rules or  precedent of the                                                               
     Regulatory Commission of Alaska;                                                                                           
                                                                                                                                
Mr. Porter also advised that  the language "or similar procedures                                                               
for  soliciting  commitments  for  pipeline  capacity  under  the                                                               
regulations,  policies,  rules  or precedent  of  the  Regulatory                                                               
Commission  of  Alaska" was  added  to  the definition  of  "open                                                               
season",  as  depicted  in  paragraph  (17)  of  the  Definitions                                                               
section, page 30 line 9.                                                                                                        
                                                                                                                                
6:45:35 PM                                                                                                                    
                                                                                                                                
This  concluded  the overview  of  the  changes included  in  the                                                               
Version "T" committee substitute.                                                                                               
                                                                                                                                
AT EASE 6:46:34 PM / 6:50:31 PM                                                                                             
                                                                                                                                
Amendment #1: This amendment  inserts "lobbying costs," following                                                               
"overhead costs," in Section 43.90.110(a)(1)(C),  page 3 line 10,                                                               
of  Article   2.  Chapter  90.  Alaska   Gasline  Inducement  Act                                                               
License., added to AS 43 by Section 1.                                                                                          
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
Co-Chair Stedman  explained that this amendment  would disqualify                                                               
lobbying costs from being a  qualified expenditure, as defined in                                                               
this subsection.                                                                                                                
                                                                                                                                
6:51:03 PM                                                                                                                    
                                                                                                                                
PATRICK    GALVIN,   Commissioner,    Department   of    Revenue,                                                               
communicated  that   the  Department   did  not  object   to  the                                                               
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Stedman removed his objection.                                                                                         
                                                                                                                                
6:52:26 PM                                                                                                                    
                                                                                                                                
There being no further objection, Amendment #1 was ADOPTED.                                                                     
                                                                                                                                
Amendment  #2:  This  amendment increases  the  "five-year"  time                                                               
period specified in  Section 43.90.110(a)(1), page 2  line 19, of                                                               
Article 2.  Chapter 90. Alaska  Gasline Inducement  Act License.,                                                               
added to AS 43 by Section 1, to a "seven-year" time period.                                                                     
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
6:53:26 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin advised that  subsection (a)(1) addressed the                                                               
time period in  which qualified expenditures would  be matched by                                                               
the  State. The  amendment  would increase  that  time period  to                                                               
seven years after the issuance of the license.                                                                                  
                                                                                                                                
Commissioner Galvin spoke as follows.                                                                                           
                                                                                                                                
     In  response  to  testimony   and  information  provided  by                                                               
     potential  applicants, its  been requested  to provide  more                                                               
     flexibility  in terms  of  both  the time  line  and in  the                                                               
     ability of  applicants to potentially have  costs associated                                                               
     with the actual FERC  [Federal Energy Regulatory Commission]                                                               
     determination timeframe,  if there's additional  costs while                                                               
     FERC may  be considering  an application and  also providing                                                               
     potentially more  time between an  open season and  when the                                                               
     beginning  …  engineering  and other  field  work  would  be                                                               
     undertaken to  pursue the FERC  certificate that  this would                                                               
     provide  more  flexibility  for applicants  and  potentially                                                               
     increase   our  pool   of  applicants   by  providing   this                                                               
     flexibility.                                                                                                               
                                                                                                                                
6:54:42 PM                                                                                                                    
                                                                                                                                
Senator  Huggins stated  he  would "counter-intuitively"  support                                                               
the amendment  in spite of  his concern  that it might  have "the                                                               
potential net effect of expanding the timeline."                                                                                
                                                                                                                                
6:55:13 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman maintained his objection to the amendment.                                                                     
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN  FAVOR:  Senator  Olson,   Senator  Huggins,  Senator  Thomas,                                                               
Senator Dyson, Senator Elton and Co-Chair Hoffman                                                                               
                                                                                                                                
OPPOSED: Co-Chair Stedman                                                                                                       
                                                                                                                                
The motion PASSED (6-1)                                                                                                         
                                                                                                                                
Amendment #2 was ADOPTED.                                                                                                       
                                                                                                                                
6:56:07 PM                                                                                                                    
                                                                                                                                
Amendment #3: This amendment deletes  "80" and inserts "90" in AS                                                               
43.90.110(a)(1)(B), page 2  line 30. The language  would read, in                                                               
part, as follows.                                                                                                               
                                                                                                                                
               (B) after the close of the first binding open                                                                    
     season, the  state shall reimburse the  licensee's qualified                                                               
     expenditures  at   the  level  specified  in   the  license;                                                               
     however, the  state's matching  contribution may  not exceed                                                               
     90 percent of the qualified expenditures …                                                                                 
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
6:56:46 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  explained that  this amendment  pertained to                                                               
the timeframe in which an  applicant could establish the level of                                                               
the  State's matching  contribution rate  after the  initial open                                                               
season. The adoption of this  amendment would increase that level                                                               
to no more than 90 percent of the qualified expenditures.                                                                       
                                                                                                                                
Commissioner Galvin continued as follows.                                                                                       
                                                                                                                                
     Again, it is something that  the applicant will establish in                                                               
     their   proposal.  This   provides   more  flexibility   for                                                               
     applicants  to potentially  put more  of the  weight on  the                                                               
     State. It  is being responsive to  primarily concerns raised                                                               
     by  TransCanada in  terms of  recognizing  the risk  sharing                                                               
     after an  open season  and concern with  regard to  the fact                                                               
     that its  primarily the  State's desire  and in  the State's                                                               
     interest  to  have the  project  continue  to move  forward,                                                               
     whereas the  company may see  a different risk  profile, and                                                               
     allowing for  the State to take  on more of that  weight may                                                               
     again  encourage more  applications, which  is the  ultimate                                                               
     goal,  and  recognizing,  also,  that  the  State's  cap  on                                                               
     expenditures remains at $500 million.                                                                                      
                                                                                                                                
Commissioner Galvin  considered "it appropriate to  be responsive                                                               
to  the desire  for flexibility  in  that area  with the  primary                                                               
desire to increase the potential pool of applicants."                                                                           
                                                                                                                                
6:58:24 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman thought  that changes, such as  the one proposed                                                               
in  this amendment,  have been  made to  "attract more  midstream                                                               
participants"   such   as   potential  pipeline   builders   like                                                               
TransCanada and Enbridge.                                                                                                       
                                                                                                                                
6:59:57 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin expressed  that,  over the  past few  weeks,                                                               
numerous  changes  have  been  made   "to  the  bill  to  attract                                                               
additional  applicants"  in  an effort  "to  eliminate  potential                                                               
barriers" identified by producers  and others. Concerns raised by                                                               
TransCanada and  others about such things  as upstream activities                                                               
have been  addressed. More  changes would  be anticipated  in the                                                               
endeavor to make  the Alaska Gasline Inducement  Act (AGIA) "more                                                               
flexible for all potential participants."                                                                                       
                                                                                                                                
7:00:34 PM                                                                                                                    
                                                                                                                                
Senator  Huggins  appreciated  the  Commissioner's  "candor"  and                                                               
hoped  that the  actions taken  in the  bill "would  attract more                                                               
applicants."  Nonetheless,   he  would  be  voting   against  the                                                               
amendment because  he was uncomfortable  being told by  a company                                                               
that, the in order to get  them to apply, the State must increase                                                               
its matching contribution level to 90 percent.                                                                                  
                                                                                                                                
7:01:14 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  clarified that "neither TransCanada  nor any                                                               
other applicant  has stated if  this changed  from 80 to  90 that                                                               
they  would come."  The  overall  effort is  to  make AGIA  "more                                                               
attractive" and  "to be  responsive to  our applicant  pool." The                                                               
issue addressed in  this amendment "was identified as  an area of                                                               
concern."                                                                                                                       
                                                                                                                                
Senator  Huggins  appreciated   the  clarification.  Nonetheless,                                                               
"when it  comes to dollars and  cents, I have a  little different                                                               
value system. So I'm a no vote."                                                                                                
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR:  Senator Olson, Senator Thomas,  Senator Dyson, Senator                                                               
Elton and Co-Chair Hoffman                                                                                                      
                                                                                                                                
OPPOSED: Senator Huggins and Co-Chair Stedman                                                                                   
                                                                                                                                
The motion PASSED (5-2)                                                                                                         
                                                                                                                                
Amendment #3 was ADOPTED.                                                                                                       
                                                                                                                                
7:03:01 PM                                                                                                                    
                                                                                                                                
Amendment  #4:   This  amendment  deletes  "and"   following  "AS                                                               
43.90.130(9);"  on  page  12  line   31  of  Article  2,  Section                                                               
43.90.170(b)(5) of Chapter  90, added to AS 43 by  Section 1, and                                                               
adds a new paragraph that reads as follows.                                                                                     
                                                                                                                                
               (6) economic value resulting from payments                                                                       
     required to  be made  to the  state under  the terms  of the                                                               
     proposal;                                                                                                                  
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
7:03:40 PM                                                                                                                    
                                                                                                                                
Commissioner Galvin  stated that  this amendment would  allow the                                                               
State  to  consider  a  variety  of  applicant  payment  options.                                                               
Further clarifying remarks were provided as follows.                                                                            
                                                                                                                                
     If an applicant were to  propose, as part of their proposal,                                                               
     making  payments to  the  State,  either in  the  form of  a                                                               
     passive equity interest, where the  payment would be made as                                                               
     part  of some  profit  sharing or  payments  based upon  the                                                               
     revenues  generated   by  the  project,  or,   as  the  port                                                               
     authority has indicated, they would  create a profit sharing                                                               
     opportunity  for the  State,  or if  the  applicant were  to                                                               
     propose  some sort  of repayment  in a  form of  just a  set                                                               
     payment as opposed to something based upon revenues.                                                                       
                                                                                                                                
     All of  those would  be something  that could  be considered                                                               
     and  evaluated as  part of  the net  present value  economic                                                               
     evaluation criteria. And,  we believe that this  is the most                                                               
     responsive way  to capture some  of those areas  of interest                                                               
     and also to provide flexibility from the applicants.                                                                       
                                                                                                                                
     But,  make it  clear that  within the  bill the  requirement                                                               
     that any  State contribution will  reduce the rate  base and                                                               
     thereby  reduce  the tariff  remains:  that  this is  not  a                                                               
     substitute  where the  State  contribution  will become  the                                                               
     loan and  will end up being  paid by the shippers  when they                                                               
     make  their tariff  payments. This  would be  something that                                                               
     would be offered by the  licensee out of their proceeds from                                                               
     the project  and would be offered  as a way of  making their                                                               
     proposal  more attractive  and  more  likely to  potentially                                                               
     succeed in the competitive bidding process.                                                                                
                                                                                                                                
7:06:03 PM                                                                                                                    
                                                                                                                                
In  response  to a  concern  voiced  by Senator  Elton,  Co-Chair                                                               
Stedman  stated   that  any   language  issues   associated  with                                                               
inserting this new paragraph into  the bill would be addressed by                                                               
the bill's drafters.                                                                                                            
                                                                                                                                
7:06:41 PM                                                                                                                    
                                                                                                                                
Senator  Olson asked  whether  the net  affect  of the  amendment                                                               
would be to  provide an opportunity "to have  an increased bottom                                                               
line for the State."                                                                                                            
                                                                                                                                
Commissioner  Galvin responded  in the  affirmative. "This  would                                                               
anticipate  that if  the licensee  were to  propose making  these                                                               
payments  it would  result in  an increased  bottom line  for the                                                               
State. We would get more value out of the project."                                                                             
                                                                                                                                
7:07:08 PM                                                                                                                    
                                                                                                                                
Senator  Huggins  complimented  the  Commissioner  on  developing                                                               
amendment  language that  would  provide an  opportunity for  the                                                               
State to further benefit from the project.                                                                                      
                                                                                                                                
Co-Chair Stedman removed his objection.                                                                                         
                                                                                                                                
There being no further objection, Amendment #4 was ADOPTED.                                                                     
                                                                                                                                
7:07:53 PM                                                                                                                    
                                                                                                                                
Amendment  #5:   This  amendment   inserts  the   word  "maximum"                                                               
following  "the" in  Article  2,  Section 43.90.130.  Application                                                               
requirements, subparagraph (15) on page  9 line 21 of Chapter 90,                                                               
added to  AS 43 by Section  1. The language would  read, in part,                                                               
as follows.                                                                                                                     
                                                                                                                                
               (15) to the maximum extent permitted by law,                                                                     
     commit to…                                                                                                                 
                                                                                                                                
Co-Chair Stedman moved Amendment #5.                                                                                            
                                                                                                                                
There being no objection, Amendment #5 was ADOPTED.                                                                             
                                                                                                                                
7:09:22 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin addressed  another  area of  concern in  the                                                               
bill; specifically language added to  paragraph (1) of Article 2,                                                               
Section  43.90.130. Application  requirements.,  page  3 line  30                                                               
through page 4, line 4 that reads, in part, as follows.                                                                         
                                                                                                                                
          …the applicant  shall file  with the  commissioners the                                                               
          number of  copies of the  application, and  any amended                                                               
          application,  required  by  the commissioners;  at  the                                                               
          same time the  copies of the application  or an amended                                                               
          application  are  filed  with  the  commissioners,  the                                                               
          applicant shall  provide six copies of  the application                                                               
          or  amended application  to  the  presiding officer  of                                                               
          each chamber of the legislature;                                                                                      
                                                                                                                                
Commissioner   Galvin  was   particularly  concerned   about  the                                                               
language  requiring  the applicant  to  provide  copies of  their                                                               
application  to the  presiding  officer of  each  chamber of  the                                                               
legislature.  The concern  is that  this action  could compromise                                                               
the integrity of the process. It  is imperative that there be "no                                                               
opportunity for one  of the applicants, who that  point still has                                                               
the opportunity  to amend  their application,  to have  access to                                                               
information provided by a competing applicant."                                                                                 
                                                                                                                                
Commissioner Galvin declared that  the commissioners must be able                                                               
to keep the applications "secure" and "within their control".                                                                   
                                                                                                                                
Co-Chair  Stedman advised  that  forthcoming  Amendment #6  might                                                               
address this concern.                                                                                                           
                                                                                                                                
AT EASE 7:11:54 PM / 7:24:26 PM                                                                                             
                                                                                                                                
Amendment   #6:  This   amendment  deletes   the  ";"   following                                                               
"legislature" on  page 4 line 4  of subsection (1) of  Article 2,                                                               
Section 43.90.130 of  Chapter 90 added to AS 43  by Section 1 and                                                               
inserts new language as follows.                                                                                                
                                                                                                                                
          in a sealed envelope, and such envelope shall not be                                                                  
     opened  and the  contents distributed  until the  receipt by                                                               
     the presiding officers  of each chamber of  notice, that the                                                               
     commissioners have determined  the applications are complete                                                               
     under AS  43.90.140 and the  presiding officer may  open the                                                               
     envelop after  signing a confidentiality agreement  under AS                                                               
     43.90.160(c).                                                                                                              
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
Co-Chair  Stedman   thought  this  language  would   address  the                                                               
confidentially  concern  arising  from providing  copies  of  the                                                               
applications  to the  presiding officer  of each  chamber of  the                                                               
Legislature.                                                                                                                    
                                                                                                                                
7:25:26 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin  advised that  the  issue  "still causes  us                                                               
concern." He elaborated as follows.                                                                                             
                                                                                                                                
     …the Executive Branch is  still responsible for implementing                                                               
     the  laws. And,  as part  of  that, we  are responsible  for                                                               
     implementing  the  AGIA  process.   And,  that  process  has                                                               
     safeguards with regard to both  the flow of the applications                                                               
     and the  retention of the confidential  materials. What this                                                               
     does,  is it  goes  outside of  the  process and  additional                                                               
     language  that,  as  far  as  I'm  aware,  is  unprecedented                                                               
     anywhere else  in State procedure,  to have  the information                                                               
     provided simultaneously  to the Executive Branch  and to the                                                               
     presiding officers.                                                                                                        
                                                                                                                                
     Now, there's  no limitation in  here on, once  the presiding                                                               
     officers  open   these,  whether  they  are   bound  to  not                                                               
     distribute the  confidential information  as is  provided in                                                               
     other sections  with regard to the  commissioners. It states                                                               
     that the  commissioners can only provide  the information to                                                               
     others once those others within  the Legislature have signed                                                               
     a confidentially  agreements provided by  the commissioners.                                                               
     This  does not  have those  safeguards built  into it.  It's                                                               
     coming  in  from  a completely  different  angle.  I  cannot                                                               
     understand the motivations given  that this information will                                                               
     basically be available to the  Legislature at the exact same                                                               
     time  under  this as  under  this  other provision,  as  the                                                               
     existing provision.                                                                                                        
                                                                                                                                
7:27:22 PM                                                                                                                    
                                                                                                                                
Commissioner   Galvin  advised   that  the   Department  of   Law                                                               
recommends the  existing bill language and  has "established that                                                               
it's got  the safeguards necessary  to ensure that  the integrity                                                               
of the  process remains. This  is not  worked out in  that regard                                                               
and there are potential loopholes that I can already see."                                                                      
                                                                                                                                
Commissioner Galvin  noted that, in  addition to the  question of                                                               
confidentiality, the  inclusion of an amended  application in the                                                               
requirement is  troublesome because "no  where in the bill  do we                                                               
talk about them being able to submit an amended application."                                                                   
                                                                                                                                
Commissioner  Galvin pointed  out  that  the application  process                                                               
currently  involves   the  submittal  of  an   application,  with                                                               
additional  information  to  be  provided  as  requested  by  the                                                               
commissioners. "That  information would  then be made  public, as                                                               
well  as the  correspondence,  when the  applications are  deemed                                                               
complete. This just is basically  additional process that's being                                                               
tacked on  here late  in the  day without us  being able  to work                                                               
through the  various pitfalls  that may  be associated  with this                                                               
additional process that,  again, I'm not aware  of anywhere else"                                                               
in the bill.                                                                                                                    
                                                                                                                                
Commissioner  Galvin  urged  the   Committee  to  return  to  the                                                               
language in the original version of  the bill as it would provide                                                               
the Legislature  "full access  to the  information once  its been                                                               
complete,  full  access  to  the  confidential  information,  and                                                               
ensures that  there isn't any  question after the fact  about the                                                               
integrity of the information flow."                                                                                             
                                                                                                                                
AT EASE 7:29:28 PM / 7:30:07 PM                                                                                             
                                                                                                                                
Without objection, Co-Chair Stedman WITHDREW Amendment #6.                                                                      
                                                                                                                                
Conceptual Amendment  #8: This  amendment deletes  "the applicant                                                               
shall file  with the  commissioners the number  of copies  of the                                                               
application,  and  any  amended   application,  required  by  the                                                               
commissioners; at the same time  the copies of the application or                                                               
an  amended application  are files  with  the commissioners,  the                                                               
applicant shall provide six copies  of the application or amended                                                               
application  to the  presiding  officer of  each  chamber of  the                                                               
legislature" following "applications;" on  page 3 line 30 through                                                               
page 4 line  4 of paragraph (1) of Article  2, Section 43.90.130.                                                               
Application  requirements.  in  Chapter  90 added  to  AS  43  by                                                               
Section 1                                                                                                                       
                                                                                                                                
Co-Chair Stedman moved and objected for further discussion.                                                                     
                                                                                                                                
7:32:34 PM                                                                                                                    
                                                                                                                                
No   discussion  forthcoming,   Co-Chair   Stedman  removed   his                                                               
objection.                                                                                                                      
                                                                                                                                
There  being no  further objection,  Conceptual Amendment  #8 was                                                               
ADOPTED.                                                                                                                        
                                                                                                                                
7:33:18 PM                                                                                                                    
                                                                                                                                
Amendment #7: This amendment inserts  "an amendment to" following                                                               
"and" in paragraph (4), page 29,  line 2 of Section 1, Article 5,                                                               
Section 43.90.900. Definitions,  of Chapter 90 added to  AS 43 by                                                               
Section 1.                                                                                                                      
                                                                                                                                
The amendment  also deletes "that  is amended to comply  with the                                                               
terms   of   the   license"  following   "(Alaska   Natural   Gas                                                               
Transportation Act  of 1976)"  on page  29, line  4 of  that same                                                               
paragraph.                                                                                                                      
                                                                                                                                
The changes proposed in the amendment would read as follows.                                                                    
                                                                                                                                
               (4) "certificate of public convenience and                                                                       
     necessity" and  "certificate" mean  a certificate  of public                                                               
     convenience  and  necessity  issued by  the  Federal  Energy                                                               
     Regulatory  Commission  or   the  Regulatory  Commission  of                                                               
     Alaska,  and  an  amendment  to   a  certificate  of  public                                                               
     convenience  of  necessity  issued  by  the  Federal  Energy                                                               
     Regulatory Commission  under 15  U.S.C. 719 et  seq. (Alaska                                                               
     Natural Gas Transportation Act of 1976);                                                                                   
                                                                                                                                
Co-Chair Stedman moved and objected for discussion.                                                                             
                                                                                                                                
7:33:27 PM                                                                                                                    
                                                                                                                                
Commissioner  Galvin explained  that, as  mentioned earlier,  the                                                               
term "or amended certificate" accompanied  all references made to                                                               
a FERC certificate  in previous bill versions.  A "global change"                                                               
was  made in  this  committee  substitute in  that  the term  "or                                                               
amended certificate"  was omitted, and  the concept of  that term                                                               
was added to the definition of "certificate".                                                                                   
                                                                                                                                
Commissioner  Galvin communicated,  however, that  the Department                                                               
has determined that  the manner in which  the amended certificate                                                               
is referenced  in that definition  could "be  clarified further".                                                               
This is the purpose of the amendment.                                                                                           
                                                                                                                                
In  response to  a question  from Co-Chair  Stedman, Commissioner                                                               
Galvin affirmed that the Department supported the amendment.                                                                    
                                                                                                                                
Co-Chair Stedman removed his objection.                                                                                         
                                                                                                                                
There being no other objection, Amendment #7 was ADOPTED.                                                                       
                                                                                                                                
No further amendments were offered.                                                                                             
                                                                                                                                
AT EASE 7:35:33 PM / 7:36:56 PM                                                                                             
                                                                                                                                
7:37:24 PM                                                                                                                    
                                                                                                                                
Senator Dyson was pleased with  the Committee's bill and with the                                                               
cooperation  provided  by  the Administration  in  the  endeavor.                                                               
While  he  would  have  welcomed  having  the  bill  reviewed  by                                                               
Legislative  consultants,   he  was   sympathetic  to   the  time                                                               
constraint placed on Committee actions.                                                                                         
                                                                                                                                
7:38:21 PM                                                                                                                    
                                                                                                                                
Co-Chair Stedman appreciated Senator  Dyson's remarks. The amount                                                               
of time he, Co-Chair Hoffman,  and Senator Huggins spent "working                                                               
through  the details"  of the  bill, with  the assistance  of the                                                               
Administration, is evidenced by the  limited number and nature of                                                               
the amendments offered today.                                                                                                   
                                                                                                                                
7:39:06 PM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman   moved  to  report  the   Version  25-GS1060\T                                                               
committee substitute, as amended,  from Committee with individual                                                               
recommendations and accompanying fiscal notes.                                                                                  
                                                                                                                                
7:39:27 PM                                                                                                                    
                                                                                                                                
There  being  no  objection,  CS  SB104(FIN)  was  REPORTED  from                                                               
Committee with  six previous  fiscal notes:  zero fiscal  note #2                                                               
from the Division of Oil  & Gas, Department of Natural Resources;                                                               
$2,226,000 fiscal  note #3 from  the Department of  Revenue; zero                                                               
fiscal note  #4 from  the Department  of Commerce,  Community and                                                               
Economic Development; zero fiscal note  #5 from the Department of                                                               
Administration;  $302,100 fiscal  note #6,  from the  Division of                                                               
Oil  &  Gas,  Department  of Natural  Resources;  and  $6,500,000                                                               
capital expenditure fiscal  note #7 from the  Department of Labor                                                               
and Workforce Development.                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects