Legislature(2011 - 2012)SENATE FINANCE 532
04/17/2011 10:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB99 | |
| HB155 | |
| HB183 | |
| HB106 | |
| HB183 | |
| HB155 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 99 | TELECONFERENCED | |
| + | HB 155 | TELECONFERENCED | |
| + | HB 183 | TELECONFERENCED | |
| + | HB 106 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 99
"An Act relating to a heating fuel energy relief
program; and providing for an effective date."
10:12:21 AM
Co-Chair Stedman discussed that his intent was to adopt the
CS for SB 99. He explained that the bill would be heard and
held for future work over the interim.
Co-Chair Hoffman MOVED to ADOPT CSSB 99 Work Draft 27-
LS0507\M (Kane, 4/11/11) as a working document.
Co-Chair Stedman OBJECTED for purpose of discussion.
SENATOR JOE PASKVAN, SPONSOR, explained that the CS made
two changes to the bill. First, it included both number 1
and number 2 fuels (Page 2, Lines 14 and 15). Second, it
eliminated a section in order to include a more broad
application.
Co-Chair Stedman WITHDREW his OBJECTION, and there being NO
further OBJECTION the CS SB 99 Work Draft 27-LS0507\M
(Kane, 4/11/11) was ADOPTED.
10:15:08 AM
Senator Paskvan discussed that the bill pertained to
heating fuel energy relief. He read from the Sponsor
Statement (copy on file) and explained that the goal was to
present a solution to the serious issue that faced
approximately 80,000 Alaskan households that used heating
oil as their primary heating source. The program would
apply to all retail sales of number 1 and number 2 heating
fuels. The program was ambitious and was designed to offer
relief to the state's residential consumers. He expounded
that Alaskans who relied on heating oil to keep warm during
the winters needed a specific and short-term solution that
met their needs. He believed that the bill allowed the
opportunity for long-term solutions to be considered,
adopted, and implemented in the state. During the past
several years the discretionary income for many residents
in the Interior, Southwest, and Southeast Alaska had ceased
to exist. He relayed that the rising cost of heating oil
was too expensive for many Alaskans to pay and was
"crushing" the average Alaskan. The high price of fuel was
occurring during a time that the state was enjoying a
surplus due to the high price of crude oil. He expressed
that the high price in heating oil had the potential to
economically devastate individual Alaskans and their
families. The bill would require the State of Alaska to
offset the home heating costs when the price of a barrel of
crude oil rose to a point where the state was enjoying
budget surpluses. He expounded that it was reasonable for
residents to pay $2.50 per gallon while the state paid the
balance to home heating dealers from budget surpluses if
the price of heating oil triggered the measures included in
SB 99. The temporary solution would allow residents to work
on long-term solutions that would restore optimism about
the state's economic future. He expressed that the proposed
legislation would allow the state to focus on its number
one priority that was renewable and sustainable energy
solutions and would protect Alaskan families.
Senator Paskvan communicated that the bill was designed to
be easily administrated. Currently distributors of home
heating oil were required to send the State of Alaska a
monthly breakdown of the quantities of the various
petroleum products that they sold, including home heating
oil. He explained that the quantities of heating oil were
easy to verify and were objectively determinable. The bill
was intended to be efficient and did not require massive
paperwork or government employment to operate. The state
would make the payment directly to the heating oil
distributors rather than to tens of thousands of
individuals. He elaborated that there were approximately
eight or nine distributors in Interior Alaska and there
were a limited number in Southwest Alaska; therefore, the
program would run efficiently. The bill required an
increase to the consumer price of heating oil during each
of the next three years, which would provide the incentive
for Alaskans to maintain the weatherization programs and
efficiency in heating costs. The bill used the New York
Mercantile Exchange (NYMEX) as a benchmark for triggers;
however, with the recent separation in the pricing between
West Texas Intermediate (WTI) and Alaska North Slope (ANS)
pricing it was possible that an ANS benchmark could be
used. He relayed that there could be alternatives such as
using the benchmark and if it hit a certain benchmark price
the price per gallon could be paid down. He discussed that
the average annual consumption in Alaska was between 800
and 1000 gallons. He reiterated the bill aimed to provide
protection for the households that heated with heating oil
and to keep them from getting crushed by high prices. He
looked forward to working with the committee on the
legislation during the interim.
10:19:46 AM
Co-Chair Stedman wondered whether the the bill would buy
down heating fuel at a BTU equivalency.
Senator Paskvan replied that the bill currently used the
NYMEX benchmark. He referred to benchmarks on Page 6 of the
Legislative Research Report dated April 11, 2011 (copy on
file) that included the average price per gallon at $2.50
and approximately $70 per barrel. The bill used the
benchmark price of a barrel of crude oil to trigger the
payment.
Co-Chair Stedman asked how the bill would bring parity for
the residents that heated with fuel oil and residents that
heated with natural gas. He discussed that natural gas
available in the Railbelt area was approximately one-third
the price of hydro, which on a BTU equivalency was around
$3.80 to $4.00 oil.
Senator Paskvan responded that alternative heating used
throughout the state could be explored during the interim.
A benchmark could be established based on electric or BTU
in order to determine how to distribute from the surplus to
Alaskans in need.
10:22:26 AM
Co-Chair Stedman thought it would be helpful to have an
energy comparison between the BTU equivalencies for
different energy sources that included wood, natural gas,
hydro and diesel fuel, and coal. He discussed a Forest
Service study that compared what it cost to heat a 1,800 to
2,000 square foot house in Southeast and also compared
different areas such as Sitka, which was relatively warm
and Fairbanks, which was cold.
Senator Paskvan agreed. He explained that there had been an
ongoing discussion related to the BTU equivalency basis
between the regions and looking at the various cost
structures such as hydroelectric power, natural gas, and
number 1 or number 2 fuels. He stressed that many Alaskans
in the Interior had to supplement or displace their oil
with wood furnaces, which had resulted in serious and
negative health effects through a process related to air
quality called PM2.5. He relayed that in the Interior oil
distributors made deliveries in 100 gallon increments and
at $4.00 per gallon many people could not afford the cost
for one delivery. He knew people that had been forced to
fill five gallon jugs with two or three gallons of diesel
fuel at the gas station in order to get through one night.
The problem was very real throughout Alaska and needed to
be addressed. He discussed that when the price of crude
reached $120 to $130 to $140 a barrel in 2008 it resulted
in prices of $4.00 to $4.50 per gallon in Interior Alaska
that were triple the amount from a decade earlier. He
opined that it was a serious economic problem that
challenged the economic sustainability of the entire
community.
10:26:12 AM
Senator Olson asked what the bill was modeled after and
whether there were national or international models that
were aimed at alleviating energy problems. He appreciated
the bill and explained that communities on the North Slope
came from the "breadbasket" of Alaska but paid the highest
price for fuel. He stressed that the bill was not the
answer to all energy problems in the state, but that it
would take the edge off for some residents.
Senator Paskvan replied that he had seen the problem and
worked to move forward towards a solution. The bill had not
been based on a specific model, but he hoped there was a
national or international model that was based on a
sovereign that had a surplus created by the high cost of
crude oil that could benefit its residents.
Senator Olson had been informed that there was a model for
Middle Eastern countries, Russia, and Mexico that provided
individuals within each sovereign the ability to have a
less expensive price than the price that was charged for
exported fuel.
Senator Thomas appreciated the bill. He referred to other
discussions that had centered on similar concepts related
to other heating sources. He discussed that the Interior,
Southwest, and Northwestern areas of the state experienced
oil prices of $4.00 to $10.00 per gallon. There was no
telling what the impact would be if oil reached $150 per
barrel in the next few years. He stressed that major
concerns focused on the PM2.5 air pollutant issue combined
with the high fuel cost that drove up the price of
everything including wood. He expounded that residents who
had transferred to other heating methods had created a
large issue that could impact federal transportation funds
and had forced some schools to limit students from going
outdoors. He explained a previous attempt at pacifying the
entire state had resulted in a $1,200 addition to the
Permanent Fund due to the inability to agree on how the
formula would have worked with the various types of fuel.
10:30:48 AM
LUKE HOPKINS, FAIRBANKS NORTH STAR BOROUGH, MAYOR (via
teleconference), spoke in support of SB 99. He explained
that the community had been looking at how it could lower
energy costs. Individuals and businesses in Fairbanks had
switched to wood heat in response to high oil prices in
2008. As a result there were many health issues in the
community that had a 250 square mile non-attainment area.
He relayed that thousands of structures in the community
were heated with the most expensive natural gas. He
stressed that the bill would provide relief from the cost
of energy for most of his community. He explained that
approximately three percent of the Fairbanks households had
been able to reduce their energy consumption by almost 30
percent as a result of the home energy retrofit program. He
had heard from residents that were spending $800 a month on
fuel. He stressed that relief from the cost of heating fuel
was imperative and urged the committee to consider ways to
help residents with the rising costs of energy immediately.
10:34:31 AM
PAUL D. KENDALL, SELF (via teleconference), pointed out
that Alaska faced problems with energy costs and that some
of the remedies did not make sense. He urged committee
members to visit the Anchorage/Mat-Su area to host a
conversation on how to help reconstruct energy for Alaskan
homes. He believed that Alaska could act as an example for
the rest of the world.
10:37:27 AM
Senator Olson wondered what plans were in place for the
interim to ensure that the bill would be polished and ready
to bring to the Senate Floor the following year.
Senator Paskvan responded that he would continue to speak
with other senators, would look for models to help design
the program, and would look at the BTU equivalency around
regions throughout the state. He reiterated that the goal
was to find a solution that was right for Alaska.
Co-Chair Stedman communicated that the U.S. Forest Service
Sitka Wood Utilization Center would be a good resource and
had done a significant amount of work on BTU equivalency
and price comparisons on alternative fuels.
10:38:49 AM
AT EASE
10:39:17 AM
RECONVENED
SB 99 was HEARD and HELD in committee for further
consideration.