Legislature(2013 - 2014)SENATE FINANCE 532
03/06/2013 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB16 | |
| SB23 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 16 | TELECONFERENCED | |
| += | SB 21 | TELECONFERENCED | |
| = | SB 23 | ||
SENATE BILL NO. 23
"An Act relating to development project financing by
the Alaska Industrial Development and Export
Authority; relating to the dividends from the Alaska
Industrial and Export Authority; authorizing the
Alaska Industrial Development and Export Authority to
provide financing and issue bonds for a liquefied
natural gas production system and natural gas
distribution system; and providing for an effective
date."
9:31:17 AM
SARAH FISHER-GOAD, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, introduced herself.
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, introduced himself.
Ms. Fisher-Goad explained that there was new information in
response to questions that were offered the week prior. She
pointed out that the fiscal notes were recently revised.
One fiscal note was in respect to the Alaska Industrial
Development and Export Authority (AIDEA) operations. She
noted that the original fiscal note showed revenues to
AIDEA, but it was determined that the revenue should show
revenue to the State of Alaska. The new fiscal note showed
revenues to the State of Alaska through dividend payments
from AIDEA. She pointed out the two-year lag, with respect
to how the AIDEA dividend was calculated. She looked at the
comprehensive spreadsheet that was attached to the fiscal
note, which showed the various pieces of the legislation;
the interior energy plan; the other aspects of the
legislation that were independent of the interior energy
plan; and showed a comprehensive look at the different
aspects of the legislation and other issues in the
operating and capital budgets. She addressed the new fiscal
note which showed the FY 14 governor's request to
capitalize the Sustainable Energy Transmission and Supply
Development Fund (SETS). She concluded that both fiscal
notes reflected the $50 million to AIDEA for the power
plant.
9:33:55 AM
DAVID MESSIER, TANANA CHIEFS CONFERENCE, FAIRBANKS (via
teleconference), spoke in support of SB 23. He remarked
that the total economic effect of Natural Gas on the rural
communities was unclear; but the hub would result in lower
energy costs in Fairbanks and the surrounding communities.
He pointed out that roughly half of the Tanana Chiefs
Conference members lived in and around Fairbanks, and he
believed that the project would have a positive benefit on
the local economy. He remarked that access to low-cost
energy had led to increased economic activity and
opportunity, and believed that access to lower cost energy
in Fairbanks would produce similar results. He stressed
that the legislation would only augment, but not replace
other alternative energy and weatherization funding.
9:36:47 AM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that the analysis was a way of separating the gas
project from other impacts of the fiscal note. He stated
that the fiscal notes included use of other financing
mechanisms, so the analysis looked at the gas project in
isolation to compare the cost to the state versus the
benefits to consumers. He pointed out the top of the
analysis, which was $50 million in cash from the general
fund; $30 million in tax credits; and $125 million from
additional state expenditures. The total state contribution
to the legislation was $205 million. He stated that the
money could earn $8.2 million at 4 percent earnings, if the
$205 million were not spent. He stressed that the $8.2
million loss in revenue was the opportunity cost. He
pointed out that the $125 million in the SETS fund would be
loaned by AIDEA to the participants in the project, and
approximately 3 percent interest that would generate $3.5
million interest earnings of which AIDEA could pay back to
the state in dividends. He looked at the 7800 customers of
AIDEA that would save an average of about $3000 per year in
fuel, giving a customer benefit of approximately $3
million, resulting in a benefit-cost ratio of $3.50. He
remarked that more sophisticated benefit-cost ratio
analysis was required for past energy projects, and many of
those projects resulted in a benefit-cost ratio that was
less than one dollar. He furthered that consumers would
incur some costs, because they needed to pay to convert to
a natural gas system. He pointed out that if a consumer
borrowed a 4 percent to pay for a $10,000 system, the loan
would cost $1200 a year over ten years. He stressed that he
did not have a position on the bill, but he was merely
sharing his analysis. He pointed out that the analysis did
not include secondary impacts like propane, or the
potential for the gas to be used by the utilities to lower
the cost of electricity.
9:42:22 AM
Senator Olson wondered if there the propane availability in
rural communities would materialize. Mr. Teal responded
that the question was beyond his level of expertise.
Senator Olson specifically queried the cost-benefit ratio
to the rural communities. Mr. Fisher-Goad responded that
AIDEA was examining that issue through the Rural Energy
Program. She pointed out that the AEA intended to ensure a
positive impact wherever propane would be available. She
specifically remarked that the Northwest Arctic Borough had
worked extensively on ensuring that propane had a positive
impact on rural communities for consumers. She furthered
that liquid natural gas (LNG) should also be made available
to the rural communities.
Senator Olson wondered if there was input from the refiners
in Fairbanks regarding LNG. Ms. Fisher-Goad replied that
there AIDEA had conversations with LNG refiners. She stated
that the Golden Valley Electric Association in Flint Hills
had partnered to potentially develop the mechanism that the
bill would contain. She furthered that the association was
no longer a partner as a project proponent, but felt that
Flint Hills was expected to be a viable customer. She
stressed that the LNG availability to rural areas would
benefit Flint Hills' operational costs. She added that the
LNG proposal was a part of the due diligence process that
the AIDEA technical team was examining to ensure that there
would be customers to fulfill the industrial load.
9:48:13 AM
Senator Olson wondered what efforts were being made to
ensure that the refineries remained viable. Ms. Fisher-Goad
replied that this issue was currently under examination.
She pointed out that the high cost of diesel fuel had
eroded the market share and customers. She stressed that
the purpose of SB 23 was to impact as many people as
possible. She felt that the alternative-doing nothing-would
impact the overall economics in Alaska, including the LNG
refineries and customers.
Senator Olson specifically looked at the heating oil
distributors, and wondered how the administration would
deal with out of work, skilled employees being unemployed
due to a competitive product. Ms. Fisher-Goad responded
that the package addressed the operational cost of the
refiners. She stressed that the intention of the refiner to
be a customer would lower their costs. She felt that the
erosion of the heating oil industry in interior Alaska was
a concern, regardless of LNG availability.
9:52:17 AM
Senator Olson stressed that he was not opposed to making
energy prices more economical in interior Alaska, but felt
that there were many people who could not have access to
the LNG. He wondered if there was a consideration for those
individuals and businesses that could not access LNG, and
would potentially suffer as a result. Ms. Fisher-Goad
responded that legislation addressed the current
individuals and businesses that did not have access to LNG.
She stated that the rural energy programs would address
those that could not have access to lower heating options.
Senator Olson commented that he had not seen any effort
form the administration to mitigate the circumstances of
the unintended consequences of the bill.
BOB SHEFCHIK, CHAIR, FAIRBANKS ENERGY COUNCIL, FAIRBANKS
(via teleconference), stated that the Flint Hills
refinery's main product was jet fuel. He stressed that the
bill would benefit them, more than harming them. He
explained that the Petro Star refinery was more
complicated, because they provided jet fuel to Eielson Air
Force Base and heating fuel in Fairbanks; but the
availability of LNG should assist the economics of their
refineries. He shared that Petro Star had not indicated a
position saying that the bill would harm their business. He
shared that the gas utility was currently working toward a
wide LNG distribution network. He concluded that the
perception that there would be a negative impact on
delivery jobs and distribution was accurate, but would be
offset by a large number of trucking jobs bringing trucks
to and from town.
9:57:44 AM
AT EASE
9:59:37 AM
RECONVENED
Vice-Chair Fairclough wondered how the dividend was
affected inside the bill, and would change in description
net income. Ms. Fisher-Goad replied that it was a technical
change, and the dividend calculation would not change.
Mr. Leonard explained reiterated Ms. Fisher-Goad's
statement.
Vice-Chair Fairclough commented that there was no
conversation regarding capital costs related to
transportation costs, and wondered if there was
anticipation to increase capital maintenance of the road
from the North Slope. Mr. Leonard responded that the
initial projection was approximately 20 to 25 trucks per
day, and the capitalization was built into cost of the
trucks. He furthered that there was work with the
Department of Transportation and Public Facilities
(DOT/PF), and DOT/PF felt that the proposal would not have
a significant impact on the capital.
Senator Bishop shared that he had conversations with
distributors that felt that LNG could "save Fairbanks." He
stressed that many distributors had large sums on their
books that had still not been collected from consumers,
because the consumers were unable to pay the cost of fuel.
He wondered if there would be due-diligence to determine if
the bill was economical. Mr. Leonard agreed, and furthered
that it was important for the bill to be economically
viable to the community and would pay for the investment
from AIDEA.
10:06:56 AM
Senator Bishop commented that one of his constituents had
and $8000 a week fuel bill, others were desperate for lower
heating costs.
Vice-Chair Fairclough MOVED to REPORT CS SB 23 (FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
SB 23 was REPORTED out of committee with a "do pass"
recommendation and with two new fiscal impact notes from
the Department of Commerce, Community and Economic
Development.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 16 - AELS Board Position Paper on Investigator - January 18, 2013 - Copy.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Letter of Support - AIA.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Letter of Support - Burdett Lent.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Letter of Support - Harley Hightower.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Letter of Support - Richard Heieren.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Sectional Analysis.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 - Sponsor Statment 012913.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 DCCED Senate LC Follow up 021113.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| 3 6 13 SB23 Gas in FBX.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 23 |
| SB023CS(LC)-DCCED-AIDEA-03-05-13.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 23 |
| SB023CS(LC)-DCCED-AIDEA-03-05-13B.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 23 |
| SB016-DCCED-CBPL-03-06-13.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |
| SB 16 Senate FIN Follow up 03-07-13.pdf |
SFIN 3/6/2013 9:00:00 AM |
SB 16 |