Legislature(2013 - 2014)
03/14/2014 10:16 AM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 138
"An Act relating to the purposes of the Alaska Gasline
Development Corporation to advance to develop a large-
diameter natural gas pipeline project, including
treatment and liquefaction facilities; establishing
the large-diameter natural gas pipeline project fund;
creating a subsidiary related to a large-diameter
natural gas pipeline project, including treatment and
liquefaction facilities; relating to the authority of
the commissioner of natural resources to negotiate
contracts related to North Slope natural gas projects,
to enter into confidentiality agreements in support of
contract negotiations and implementation, and to take
custody of gas delivered to the state under an
election to pay the oil and gas production tax in
kind; relating to the sale, exchange, or disposal of
gas delivered to the state under an election to pay
the oil and gas production tax in kind; relating to
the duties of the commissioner of revenue to direct
the disposition of revenues received from gas
delivered to the state in kind and to consult with the
commissioner of natural resources on the custody and
disposition of gas delivered to the state in kind;
relating to the authority of the commissioner of
natural resources to propose modifications to existing
state oil and gas leases; making certain information
provided to the Department of Natural Resources and
the Department of Revenue exempt from inspection as a
public record; making certain tax information related
to an election to pay the oil and gas production tax
in kind exempt from tax confidentiality provisions;
relating to establishing under the oil and gas
production tax a gross tax rate for gas after 2021;
making the alternate minimum tax on oil and gas
produced north of 68 degrees North latitude after 2021
apply only to oil; relating to apportionment factors
of the Alaska Net Income Tax Act; authorizing a
producer's election to pay the oil and gas production
tax in kind for certain gas and relating to the
authorization; relating to monthly installment
payments of the oil and gas production tax; relating
to interest payments on monthly installment payments
of the oil and gas production tax; relating to
settlements between producers and royalty owners for
oil and gas production tax; relating to annual
statements by producers and explorers; relating to
annual production tax values; relating to lease
expenditures; amending the definition of gross value
at the 'point of production' for gas for purposes of
the oil and gas production tax; adding definitions
related to natural gas terms; clarifying that credit
may not be taken against the in-kind levy of the oil
and gas production tax for gas for purposes of the
exploration incentive credit, the oil or gas producer
education credit, and the film production tax credit;
making conforming amendments; and providing for an
effective date."
10:16:40 AM
Vice-Chair Fairclough MOVED to ADOPT the proposed committee
substitute for SB 138 (FIN), WORK DRAFT 28-GS2806/R
(Bullock, 3/12/14) as a working document.
Co-Chair Kelly OBJECTED for the purpose of discussion.
10:18:41 AM
AT EASE
10:19:19 AM
RECONVENED
JOE DUBLER, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
ALASKA GASLINE DEVELOPMENT CORPORATION (via
teleconference), discussed the new Department of Commerce,
Community and Economic Development (DCCED) fiscal note
appropriated to the Alaska Gasline Development Corporation
(AGDC). He referenced the AKLNG Expenditure Summary
analysis on page 4, of the fiscal note that contained the
projects total expenditure summary during the PreFEED (pre-
front-end engineering and design work) stage. He relayed
that the total appropriations included expenditures for FY
14 through FY 17. The expenditures for FY 16 and FY 17
would need future legislative appropriation. He reported
that the expenditure for personal services was $4.41
million.
Co-Chair Kelly interjected that $66 million of the total
appropriations was included in the FY 14 supplemental
budget.
Mr. Dubler answered in the affirmative.
Mr. Dubler listed the other project services expenditures:
$15.1 million for contractual services, $2.4 million for
travel, $988.2 thousand for the lease for office space,
$582.6 thousand for ADGC board expenses, and $230 thousand
for capital outlay. He turned to the expenditure for State
Equity Participation, which reflected the state's 25
percent interest in the LNG facility [$57.8 million]. He
moved to the State 40 percent Option on TransCanada for
$42.25 million and detailed that the state negotiated a 40
percent buyout on TransCanada's midstream operations. He
defined "midstream" as including the North Slope treatment
facility and the main pipeline from the North Slope to Big
Lake. He identified the expenditure for the State's
Guarantee of TransCanada [$70.1 million] and noted that the
state negotiated the reimbursement for all of TransCanada's
midstream expenses plus an interest rate of 7.1 percent if
the project was terminated for any reason other than
TransCanada's voluntary withdrawal from the project as
contained in the Memorandum of Agreement (MOU). The project
total was $194 million.
Mr. Dubler drew attention to page 2 of the fiscal note and
read the following:
This bill expands the purpose of the Alaska Gasline
Development Corporation (AGDC) by authorizing it to
participate in advancing an Alaska liquefied natural
gas project (AKLNG) while continuing to advance the
in-state natural gas pipeline project…
Mr. Dubler related that AGDC would continue to advance both
projects while avoiding intermingling or conflicts of
interest. He listed the additional positions that AGDC
would need to hire for the AK LNG project:
1 - VP, $410.0 annual burdened salary ($250.0 +
benefits)
1 - Program Manager, $410.0 annual burdened salary
($250.0 + benefits)
1 - Contract Compliance Officer, $196.8 annual
burdened salary ($120.0 + benefits)
1 - Senior Accountant, $164.0 annual burdened salary
($100.0 + benefits)
2 - Administrative Assistant, each at $106.6 annual
burdened salary ($65.0 + benefits)
Mr. Dubler noted that AGDC would engage in contract
negotiations for approximately 50 contracts. The
TransCanada transactions and AK LNG project billings would
require an additional accountant. The two administrative
assistants were necessary for staff support.
Mr. Dubler communicated that other project related
expenditures were necessary in support of personal
services. The majority of the project related expenditures
were for contractual services. The corporation planned to
hire as many contractors as possible to maintain the
flexibility to add or remove staff according to project
needs. He related that AGDC anticipated hiring two legal
contractors full time for approximately two years at
approximately $600,000 in annual salaries (approximately
$300 per hour) to support AGDC's efforts in deal origination
and negotiation. He indicated that AGDC would hire three
commercial contractors to assist in negotiations on gas
marketing and gas distribution. He noted that the pipeline
would contain five off take points along the route. The
corporation would need to work with communities along the
pipeline route in order to ensure participation and
adequate infrastructure for gas delivery. He reported that
AGDC would hire three full time gas marketing contractors
focused on marketing LNG gas overseas at a cost of
approximately $400 thousand per year.
Mr. Dubler expected that AGDC would hire five engineering
contractors for the following: North Slope facility,
pipeline, LNG facility, and two subject matter experts. The
project engineers would oversee the work that was being
done by the AK LNG project. He referenced the travel
expenses of $2.4 million on page 3 of the fiscal note. He
stated that most of the meetings that AGDC held were
located in Anchorage, Seattle, Washington and Houston,
Texas. Extensive and frequent travel expenses will be
incurred by senior corporate staff. He moved to the AGDC
board appropriation and anticipated that its board meetings
would run once per month and would take up to several full
days due to the increased responsibilities from the AK LNG
project [$582.6 thousand]. He pointed to the capital outlay
expenses of $230 thousand for communications equipment,
Information Technology, and furnishings for expanded staff.
He discussed the Capital Investment and Participation
Expenditures. He reported that AGDC's share of the pre-feed
LNG facility technical costs set at 25 percent equity
participation were estimated at $42.5 million of the $170
million total. The corporation anticipated that an
additional $2 million will be required to cover AGDC's
share of nontechnical project costs that included items
such as public outreach for a subtotal of $44.5 million.
10:29:25 AM
Vice-Chair Fairclough referred to Mr. Dubler's comments
that government lobbying was prohibited from AGDC's portion
of the nontechnical project costs.
Mr. Dubler confirmed the statement and acknowledged AGDC's
restriction on spending state funds to lobby state
government.
Vice-Chair Fairclough inquired whether AGDC could lobby the
federal government for the export permit.
Mr. Dubler answered that the application process for the
export permit was not considered a lobbying effort.
Vice-Chair Fairclough wanted to ensure that the language in
the CS allowed the state to apply to the Federal Energy
Regulatory Commission (FERC) for the export permit.
Co-Chair Kelly requested that Mr. Dubler follow up on the
concern.
Mr. Dubler agreed. He continued to speak to the fiscal note
and related that AGDC included a 30 percent contingency
[$13.3 million]. He explained that the estimated project
total of $435 million was a rough approximation that
initially was as high as $450 million to $550 million. The
contingency would allow AGDC to continue participating in
the project if a "cash call" for expended funds was
required by the lead participant. If AGDC did not have
adequate funds the corporation would be in default and
barred from the project. He pointed to the state's 40
percent buy-out option on TransCanada midstream interests
of $26.5 million. If exercised, TransCanada was entitled to
a reimbursement for all of its non-technical costs on the
40 percent of its midstream interest estimated at $6.0
million subtotaling $32.5 million. In addition, a 30
percent contingency of $9.75 million was added for a total
of $42.25 million.
Mr. Dubler drew attention to the TransCanada Investment
Return Guarantee expenditure on page 4 of the fiscal note.
He communicated that if TransCanada failed to progress to
the FEED stage of the project, the MOU between the State
and TransCanada required the state to include the Pre-FEED
costs of 15 percent on TransCanada's midstream share of the
total project costs amounting to $265 million, which
totaled $39.75 million plus any non-technical and
developmental cost allocations estimated at $9 million
subtotaling $48.75 million. In addition, the 30 percent
contingency of $14.625 million and the 7.1 percent return
on the investment AFUDC (allowance for funds used during
construction) of $6.749 million were included for the total
buy-out costs of $70.124 million. He reiterated that the
total FY 14 supplemental costs associated with the fiscal
note total appropriation was $66.726 million.
Co-Chair Kelly inquired whether the request in the current
year was $66.726 million and that all of the fiscal note
expenditures would take place between enactment of the
legislation and the FEED stage.
Mr. Dubler replied in the affirmative.
Co-Chair Kelly questioned whether the remaining $194.018
million required future legislative appropriation.
Mr. Dubler replied in the affirmative and relayed that at
the same time the legislature could choose to exercise the
40 percent TransCanada midstream buy-out option.
Co-Chair Meyer inquired whether 30 percent was a usual or
customary amount for a contingency fee. He thought that the
amount was excessive.
MICHAEL PAWLOWSKI, DEPUTY COMMISSIONER, STRATEGIC FINANCE,
DEPARTMENT OF REVENUE, replied that he did not have an
opinion on the contingency fee and stated that the project
manager would be better suited to answer the question.
10:38:14 AM
AT EASE
10:40:22 AM
RECONVENED
Mr. Pawlowski observed that the $70 million expenditure for
the investment return guarantee and the state's 40 percent
buy-out option with TransCanada would be a "participatory
decision" with the legislature. The costs were "outliers"
that might or might not occur.
Co-Chair Kelly noted that members were questioning a
contingency as large as 30 percent. He noted that 30
percent was probably not excessive considering the real
possibility of project cost increases of up to 25 percent.
He requested further justification for the 30 percent
contingency.
Mr. Dubler stated that the project was at the "conceptual
level" and that accurate cost estimations for a three year
period was extremely difficult. The corporation felt that
the current estimates were low and had included the 30
percent contingency to allow for AGDC's continued
participation in the event of cost overruns. He relayed
that the producers were including contingencies in their
cost estimates and TransCanada supported the 30 percent
figure.
Co-Chair Kelly reminded the committee that the costs were
estimates and much of the appropriation would not be
expended in the current budget cycle. He supported the 30
percent contingency language. He asked Mr. Pawlowski to
briefly summarize why the administration felt the
relationship with TransCanada was a benefit to the state.
Mr. Pawlowski responded that the benefit of the TransCanada
partnership, beyond its expertise and support for the
state, was the commitment of capital; if TransCanada was
not in the position of carrying the state's share in the
midstream Pre-Feed portion of the project, the
appropriation requests would be significantly higher. He
pointed out that the move by the committee to take a larger
share of the gas and a larger position in the project was
supported by the partnership with TransCanada and in the
long term interest of the state.
Co-Chair Kelly wanted to discuss the new Department of
Natural Resources (DNR) fiscal note in the amount of
$8.961.7 million in FY 2015.
JOE BALASH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
reported that the department's fiscal note remained
unchanged from the original version of the legislation. The
expenditures were related to the department's participation
in developing the upstream and marketing agreements, which
included contractual spending for legal counsel and
consultant expertise.
Senator Bishop wondered whether the department would
encounter difficulty in recruiting consultants with the
required expertise.
Commissioner Balash thought that the opportunity to be part
of the project would attract the required caliber of staff
necessary to succeed.
Co-Chair Kelly continued with the fiscal notes. He cited
the new zero CCED fiscal note appropriated to the Alaska
Energy Authority (AEA). He pointed to a new zero fiscal
note appropriated for Fund Capitalization.
Co-Chair Meyer interjected that the DCCED [AEA] fiscal note
contained a capital cost [$1.375. million].
Co-Chair Meyer requested a summary of the fiscal notes.
Co-Chair Kelly requested that additional information on the
AGDC fiscal note was sent to members before the bill went
to the Senate floor for a vote.
Mr. Dubler agreed.
10:53:19 AM
AT EASE
11:00:22 AM
RECONVENED
Vice-Chair Fairclough observed that there were two AGDC
fiscal notes that both referenced the $66.726.7 million FY
14 supplemental cost and asked for clarification.
Mr. Dubler explained that the first DCCED fiscal note he
previously discussed granted the actual authority to spend
the fund. The fund source code listed on the fiscal note
(1178 temporary code) was the fund that the other new Fund
Capitalization fiscal note created. The Fund Capitalization
fiscal note transferred the $66.726 million into the Large
Diameter Natural Gas Pipeline Fund and the DCCED [AGDC]
fiscal note authorized expenditures from the fund.
Vice-Chair Fairclough requested additional clarification.
Mr. Dubler replied that the Fund Capitalization fiscal note
transferred the $66.726.7 million from the general fund
into the Large Diameter Natural Gas Pipeline Fund
established in SB 138. He recounted that once the funds
were transferred into the pipeline fund the DCCED [AGDC]
fiscal note authorized expenditures from the fund.
Mr. Pawlowski communicated that the other fiscal notes had
previously been submitted by DOR and that there were no
changes from the previous versions. He delineated that the
DOR (FN 4 (REV) fiscal note appropriated $250 thousand to
the Department of Law for developing regulations regarding
the new tax provisions and $500,000 was appropriated for
contracts to upgrade the tax revenue management system to
reflect the tax law changes in SB 138. He reported that the
new DOR fiscal note in the amount of $500 thousand was a
direct result of an amendment added in the Senate Resource
Committee version mandating DOR to undertake a study to
determine how individual Alaskans can invest in the
pipeline project, which was expanded to municipalities and
regional corporations in the Senate Finance Committee.
Co-Chair Meyer inquired what the total FY 14 expenditure
was.
11:06:12 AM
AT EASE
11:07:21 AM
RECONVENED
Co-Chair Kelly related that the committee was in the
process of verifying the fiscal notes for the record.
11:07:48 AM
AT EASE
11:09:32 AM
RECONVENED
Mr. Pawlowski recounted that in FY 15, the appropriations
for DOR were $750 thousand and $500 thousand. The FY 15
appropriation for DNR totaled $8.961.7 million and $1.375
million in capital costs that were appropriated for AEA.
The total in FY 15 was $11.586.7 million. He added that
$1.394 million from the AGDC fiscal note was not counted in
the total because the money was coming from the FY 14
appropriation of $66.726.7 million.
Co-Chair Kelly noted that the $1.394 million was a capital
appropriation.
Co-Chair Meyer wondered what the fund source for the
funding was.
Mr. Pawlowski replied that the fund source was the general
fund.
Co-Chair Meyer inquired if the source of the general funds
was the Statutory Budget Reserve (SBR).
Mr. Pawlowski responded in the affirmative.
Co-Chair Kelly requested that Commissioner Balash provide a
brief synopsis of the Senate Finance Committee's changes to
SB 138.
Commissioner Balash communicated that the committee enabled
the process to advance to the PreFEED phase and develop the
next round of agreements. The legislation authorized DNR to
participate in the project at the 25 percent threshold and
provided a process for advancement of the project, which
included briefing legislative committees in executive
session. Additionally, the committee had identified AGDC's
role very clearly in terms of the agreements that it would
sign. He emphasized that AGDC would be the signatories for
the equity agreements. Consequently, a midstream services
agreement between DOR and DNR was necessary. AGDC would be
the signatory for the agreements along with the producers
and TransCanada. The rest of the agreements: royalty,
fiscal, upstream balancing, off take agreements, LNG
marketing, and the mid-stream services agreements would
require the signatures of DOR and DNR. He thought that the
committee had clearly identified the roles and
responsibilities of the departments and AGDC. He added that
AGDC was authorized to promote both the AK LNG project and
the in-state gas pipeline project efficiently with the
option to pursue either project in the future.
11:15:38 AM
AT EASE
11:15:59 AM
RECONVENED
Co-Chair Kelly WITHDREW his OBJECTION. There being NO
further OBJECTION, WORK DRAFT 28-GS2806/R (Bullock,
3/12/14) was ADOPTED as a working document.
11:16:07 AM
AT EASE
11:45:11 AM
RECONVENED
Co-Chair Kelly introduced Amendment 1.
11:46:02 AM
AT EASE
11:51:19 AM
RECONVENED
Senator Bishop MOVED to ADOPT Amendment 1 28-GS2806\R.1,
Nauman/Bullock 3/13/14 (copy on file):
Page 2, line 4, following "gas;";
Insert "relating to the oil or gas producers education
credit;"
Page 30, line 19, following "programs,":
Insert "equipment,"
Page 30, line 20, following "school":
Insert ", a nonprofit regional training center
recognized by the Department of Labor and Workforce
Development, and an apprenticeship program in the
state that is registered with the United State
Department of Labor under 29 U.S.C. 50- 50b (National
Apprenticeship Act)"
Page 31, line 1:
Delete "and"
Following "2012"
Insert "and sec. 36 of this Act"
Page 31, line 10-11:
Delete all material and insert:
"(3) for vocational education courses, programs,
equipment, and facilities by the state-operated
vocational technical education and training school, a
nonprofit regional training center recognized by the
Department of Labor and Workforce Development, and an
apprenticeship program in the state that is registered
with the United State Department of Labor under 29
U.S.C. 50-50b (National Apprenticeship Act); and"
Co-Chair Kelly OBJECTED for the purpose of discussion.
Senator Bishop spoke to Amendment 1. He offered that the
intent of the amendment was to increase and improve the
workforce for the 15,000 direct and 25,000 indirect jobs
that would be created from a gasline system. He delineated
that roughly three years ago the Department of Labor and
Workforce Development (DOL) had identified about 15
regional training centers however, the centers were
ineligible for the education tax credit that was enacted
under previous oil and gas legislation. He pointed out that
the amendment qualified the training centers for the tax
credit and included apprenticeship programs.
Co-Chair Kelly asked what type of apprenticeship programs
qualified for the credit.
Senator Bishop answered that union, non-union, jointly
administered trust, and single employer apprenticeship
programs all qualified for the tax credit.
Co-Chair Kelly WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
Senator Hoffman MOVED to ADOPT Amendment 2, 28-GS2806\R.2,
Bullock, 3/13/14 (copy on file):
Page 2, line 13, following "development;":
Insert "establishing the rural capital energy fund;"
Page 11, following line 26:
Insert a new bill section to read:
"*Sec. 13. AS 37.05 is amended by adding a new section
to article 6 to read:
Sec. 37.05.610 Rural capital energy fund.(a) The rural
capital energy fund is created as a special amount in
the general fund. The fund consists of the amount
determined and deposited in the fund under (b) of this
section and interest earned on the fund balance. The
purpose of the fund is to provide a source from which
the legislature may appropriate money to develop
infrastructure to deliver energy to areas of the state
that are not expected to have or do not have direct
access the a North Slope natural gas pipeline.
(b) The amount to be deposited in (a) of this
section is 30 percent of the revenue received from the
state's royalty gas transported in an Alaska Liquefied
natural gas project that remains after the payment to
the Alaska permanent fund under AS 37.13.010.
(c) The Legislature may make appropriations from
the rural capital energy fund for the purpose
described in (a) of this section.
(d) Nothing in this section creates a dedicated
fund.
(e) In this section,
(1) "Alaska Liquefied natural gas project"
had meaning given in AS 31.25.390;
(2) "North Slope natural gas pipeline" has
the meaning given in AS 42.06.630."
Renumber the following bill sections accordingly.
Page 13, line 21:
Delete "sec. 13"
Insert "sec. 14"
Page 17, line 11:
Delete "sec. 16"
Insert "sec. 17"
Page 21, line 3:
Delete "sec. 26"
Insert "sec. 27"
Page 24, line 27:
Delete "sec. 29"
Insert "sec. 30"
Page 52, line 31:
Delete "sec. 15"
Insert "sec. 16"
Page 53, lines 18-19:
Delete "sec. 22"
Insert "sec. 23"
Page 54, line 17:
Delete "sec. 13"
Insert "sec. 14"
Page 55, line 29:
Delete "Sections 1-13, 15, 16, 22-26, 28, 29, 36,
38, and 54-61"
Insert "Sections 1-14, 16, 17, 23-27, 29, 30, 37,
39, and 55-62"
Page 56, line 1:
Delete "secs. 62 and 63"
Insert "secs. 63 and 64"
Co-Chair Kelly OBJECTED for the purpose discussion.
Senator Hoffman MOVED to ADOPT Amendment 2 with the
following modification:
Page 1, line 14:
Delete "30"
Insert "10"
Co-Chair Kelly stated that the motion needed to be offered
as an amendment to Amendment 2 and would be addressed
later.
TIM GRUSSENDORF, STAFF, SENATOR LYMAN HOFFMAN, spoke to
amendment 2 and related that the amendment's intent was to
respond to members' concerns that all regions of the state
would benefit from the proposed LNG pipeline. He explained
that Section 59, page 53 of the current version of the
legislation (CS Work Draft SB 138 (FIN) 28-GS2806/R)
directed AEA and Alaska Industrial Development and Export
Authority (AIDEA) to develop a plan and make
recommendations to the legislature by January 1, 2017 on
infrastructure needs to develop and deliver any type of
affordable energy to all regions of the state without
direct access to the North Slope natural gasline. The
amendment established a fund from the natural gas pipeline
royalties. He noted that line 14 established the rate of 30
percent and would be drawn on the amount after the deposit
to the permanent fund. He cited line 18 (c) that clarified
that the legislature "may" authorize the appropriation in
order not to commit future legislatures. He referenced line
20 (d) that specified that the fund would not be dedicated.
He reported that the rest of the amendment contained
definitions and conforming changes.
Co-Chair Kelly MOVED to AMEND Amendment 2 with the
following change:
Page 1, line 14:
Delete "30"
Insert "10"
There being NO OBJECTION, Amendment 2 was AMENDED.
Co-Chair Meyer noted that he liked the amended version of
Amendment 2, set at 10 percent instead of 30 percent much
better, but thought that the project would benefit the
entire state of Alaska. He opined that "a rising tide
raises all ships" and thought that there would be more
revenue coming into the general fund, which would result in
more funding to distribute throughout the state. He
expressed concern that the amendment was potentially taking
money from future legislatures who might need the money for
Medicaid, the unfunded liability, or education. He stated
that the state had well over one hundred different fund
sources and that the amendment was creating another fund.
He noted that there were already several funds set up to
address the energy problems in Rural Alaska. He pointed to
the Power Cost Equalization (PCE) Fund and noted that it
had a large endowment for Rural Alaska. He mentioned the
Low Income Home Energy Assistance Program (LIHEAP) and the
Renewable Energy Fund and related that most of the
programs' funding was going to rural Alaska. He believed
that Alaska already had a lot of funds that addressed
energy needs in Rural Alaska, but understood that some
needs were not being addressed. He reiterated his concern
that the consequences of adopting Amendment 2 would take
away some flexibility and options for future legislators
that might need the funding in the general fund.
11:59:18 AM
Senator Hoffman offered that the problem with the high cost
of energy in Alaska was that people were leaving Fairbanks,
Rural Alaska, and the state. He wondered what good the
legislature was doing developing energy resources if it
could not address the energy needs of Alaskans. He thought
that Alaska needed to monetize the gas, but that it needed
to be sure that all Alaskans benefited from the lower
energy costs. He felt that Alaskans agreed with his belief
that Alaskans should benefit from energy development
through reduced energy costs. He related that even with all
of the energy assistance programs, people in Rural Alaska
were still spending 40 percent to 60 percent of their
disposable income on energy needs. He believed that if
people were paying 40 percent to 60 percent of their
disposable income on energy needs in any urban community,
remedial action would be taken.
Senator Hoffman furthered that the effect of the amendment
would not be immediate. The state would have to wait at
least eighteen years before the pipeline could provide
relief from high energy costs. He felt that the amendment
gave hope to all Alaskans.
12:02:16 PM
AT EASE
12:02:45 PM
RECONVENED
Vice-Chair Fairclough inquired whether any effective dates
in the bill were altered by Amendment 2.
Senator Hoffman replied that effective dates would not be
affected by the amendment.
Vice-Chair Fairclough requested clarification on the record
regarding what the definition of "rural" was. She pointed
out that her district had a rural component even though it
was close to an urban center.
Senator Hoffman stated that for the purposes of the rural
capital energy fund the amendment specified who would
benefit from the fund on line 12:
…areas of the state that are not expected to have or
do not have direct access to a North Slope natural gas
pipeline.
Vice-Chair Fairclough appreciated the clarification and
noted that there were many different definitions in Alaska
statutes to describe "rural".
Co-Chair Kelly supported the language in the amendment.
Senator Dunleavy supported the amendment and wanted to be
added as a sponsor to Amendment 2. He offered that he
represented a district where some areas would not have
direct access to the gas pipeline.
Co-Chair Kelly commented that after much committee
discussion he thought that Senator Hoffman was on the right
track offering the amendment in order to ensure that the
entire state benefited from the project.
Co-Chair Kelly WITHDREW his OBJECTION.
Senator Olson wanted the public to be aware that the
committee was looking out for all of the residents of the
state. He disagreed with Co-Chair Meyer's comment that "a
rising tide raises all ships." He believed that the natural
gas pipeline would not benefit isolated areas of the state
in Rural Alaska. He pointed out that Alaska was an "owner"
state and all of the residents of Alaska owned the
resource. He wanted to help all of the "disenfranchised"
people of the state that pay high energy costs and would
not benefit from the resource when the gas pipeline was
operational. He thanked the committee for its support of
the amendment especially for the residents that would
benefit from its adoption.
Co-Chair Kelly believed that the legislature would look
back at Amendment 2 as a legacy decision creating a legacy
fund.
There being NO further OBJECTION, Amendment 2 was ADOPTED
as amended.
Co-Chair Kelly MOVED to ADOPT Amendment 3, 28-GS2806\R.3,
Bullock, 3/13/14 (copy on file):
Page 8, line 22-24:
Delete ", but may not use money appropriated for the
purposes as described in AS 31.25.005(5)"
Page 9, lines 8-9"
Delete ", but the corporation may not use the money
appropriated to the fund for the purposes described in
AS 31.25.005(4)"
Page 9, line 20-23:
Delete "A subsidiary corporation created under this
section may be incorporated under AS 10.20.146 -
10.20.166, or other law applicable to the
incorporation of the subsidiary corporation. Subject
to the exceptions and"
Insert "Subject to the"
Page 9, line 25, following "[":
Insert "A SUBSIDARY CORPORATION CREATED UNDER THIS
SECTION MAY BE INCORPORATED UNDER AS 10.20.146 -
10.20.166"
12:11:15 PM
BRUCE CAMPBELL, STAFF, SENATOR PETE KELLY, spoke to
Amendment 3. He relayed that AGDC had operated as two
distinct subsidiaries; one in the interest of the in-state
gas pipeline and another in the interest of the AK LNG
project. In an effort to create efficiencies, the previous
committee removed the separation that caused AGDC to act as
two subsidiaries. However, the language prohibiting the
corporation from expending funding appropriated to one fund
for the purposes of another remained in the bill. He
expounded that the amendment maintained the funds
separation but removed the prohibition to allow operational
efficiency and avoid needing separate staff for each fund.
Co-Chair Kelly WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 3 was ADOPTED.
Co-Chair Kelly moved to Amendment 4 and explained that the
amendment addressed a change that the committee included in
the current version of the bill, which related to the
restriction on employment subsequent to work on the AK LNG
project. He indicated that the language in the previous
amendment was too restrictive and may have unintended
consequences. The language already existed in ethics
statutes.
Co-Chair Kelly MOVED to ADOPT Amendment 4, 28-GS2806\R.4,
Bullock, 3/14/14 (copy on file):
Page 2, lines 5-7
Delete all material.
Page 52, line, through page 53, line 8:
Delete all material.
renumber the following bill sections accordingly.
Page 55, line 29:
Delete "54-61"
Insert "54-60"
Page 56, line 1:
Delete "secs. 62 and 63"
Insert "secs. 61 and 62"
Co-Chair Meyer OBJECTED for the purpose discussion.
SUSAN POLLARD, ASSISTANT ATTORNEY GENERAL, OIL, GAS, AND
MINING SECTION, DEPARTMENT OF LAW, discussed amendment 4.
She described how the Executive Ethics Act affected public
officers [employee] and employment restriction after
leaving board membership or state employment. She detailed
that the Amendment related to Section 57 in the current
version of the bill and referenced the ethics act located
in Title 39, Chapter 25, Section 100, which specifically
restricted public employment after leaving state service.
The bill did not change the act except for the uncodified
law that related specifically to the contract negotiations
in Section 13 of the bill. She elaborated that AS 39.52.180
limited a public officer (employee) or a board member "from
accepting compensation for services after leaving state
service related to a matter." "Matter" was specifically
described in the act as "includes a case preceding
application contract determination proposal or
consideration of a legislative bill, a resolution, a
constitutional amendment, or other legislative measure,
proposal, consideration, or adoption of an administrative
regulation." She added that "if a person participated
personally and substantially in a particular matter they
would be limited under the two year time period of the
Executive Ethics Act from acting on the matter for
compensation" subsequent to leaving state service.
Senator Olson referenced AS 39.52.010 regarding the public
officers and employees under the Alaska Executive Branch
Ethics Act. He read:³(6) no code of conduct, however
comprehensive, can anticipate all situations…" He believed
the situation was unique; the state would be a partner in
the largest project in North America. He wanted to avoid a
situation where a former state employee involved in the AK
LNG project would work for related industry after leaving
state employment. He shared that a similar situation
happened in the past.
Co-Chair Kelly asked whether the Executive Ethics Act would
cover the scenario and if the act applied to commissioners.
Ms. Pollard explained that according to the act, after a
public officer left state service a designated ethics
supervisor would determine what matters the individual
would be restricted from working on. The ethics act would
apply to a commissioner but it would depend on each
particular situation to determine whether the ethics act
specifically applied.
Co-Chair Kelly asked whether the Executive Ethics Act
envisioned specific scenarios similar to the situation
Senator Olsen described.
Ms. Pollard remarked that someone substantially involved in
a contract negotiation would be prohibited, under the act
from other employment involved in that particular matter.
Vice-Chair Fairclough wanted to ensure that any effective
date and section number changes due to adoption of multiple
amendments would be accurately revised in the final version
of the legislation.
Mr. Campbell responded that Section 37 had a different
effective date of January 1, 2021 and Section 62 and
Section 63 had effective dates of January 1, 2015 and would
be appropriately revised by Legislative Legal Services.
Co-Chair Kelly noted that legal services had orders to
conform all of the amendments to the actions taken by the
committee.
Co-Chair Meyer WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 4 was ADOPTED.
12:22:51 PM
AT EASE
12:24:39 PM
RECONVENED
Mr. Campbell spoke to the technical drafting corrections
(copy on file):
1) Page 16, line 20: Delete: "form" replace with
"from"
2) Page 17, line 29: Delete: "form" replace with
"from"
3) Page 10, Lines] 5 & 16, Section 12, (7)(C). Style
issue, there appears to be an extra "and" or one
too many commas.
4) Page] 9, line 25, after "from state oil and gas",
insert: "and gas only" Conforms language to the
technically correct reference in DNR statutes, per
the convention throughout 38.05, which refers to
"oil and gas and gas only" leases.
5) Page 52, line 31, after "enacted by section"
Delete: "15" insert "13"
Mr. Campbell turned to the "Summary of Proposed Changes"
(copy on file). He indicated that the changes were the
amendments drafted into the current version from prior
committee actions.
Senator Bishop read the Letter of Intent (copy on file):
Letter of Intent for SB 138
It is the intent of the Alaska State Legislature that
the Alaska LNG project honor the commitments, as
copied below, made in "Article 11: Alaska Hire and
Content", agreed to in the Heads of Agreement by and
among the Administration of the State of Alaska,
Alaska Gas-line Development Corporation, TransCanada
Alaska Development Inc., ExxonMobil Alaska Production
Inc., ConocoPhillips Alaska, Inc., and BP Exploration
(Alaska) Inc. through construction of the project.
ARTICLE 11: ALASKA HIRE AND CONTENT
11.1 For the Alaska LNG Project, the Alaska LNG
Parties will, within the constraints of law:
a. Employ Alaska residents and contract with Alaska
businesses to the extent they are qualified,
available, ready, willing and cost competitive;
b. Use, as far as practicable, job centers and
associated services operated by the State Department
of Labor and Workforce Development;
c. Participate with the State Department of Labor and
Workforce Development to update the training plan for
an LNG export project including main operations;
d. Advertise for available positions locally and use,
as far as practicable, Alaska job service
organizations to notify the Alaska public; and
e. Work with the State Department of Labor and
Workforce Development and other organizations to
provide training.
11.2 Prior to construction, the Alaska LNG Parties
commit to negotiate in good faith project labor
Senator Dunleavy requested clarification that the Letter of
Intent was not codified law.
Co-Chair Kelly answered in the affirmative.
Vice-Chair Fairclough MOVED to REPORT CSSB 138(FIN) out of
committee as amended with individual recommendations and
with the accompanying fiscal notes from the Senate Finance
Committee. There being NO OBJECTION, it was so ordered.
12:29:36 PM
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