Legislature(2011 - 2012)BELTZ 105 (TSBldg)

03/05/2012 01:30 PM Senate JUDICIARY


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01:33:23 PM Start
01:34:02 PM HB6
02:08:08 PM Confirmation Hearings: Select Committee on Legislative Ethics
02:16:18 PM HB215
03:05:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearing: TELECONFERENCED
Select Committee on Legislative Ethics:
Herman G. Walker, Anchorage
Dennis "Skip" Cook, Fairbanks
+ HB 6 REMOVING A REGENT TELECONFERENCED
Heard & Held
+ HB 215 PIPELINE PROJECT: JUDICIAL REVIEW/ROW TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          HB 215-PIPELINE PROJECT: JUDICIAL REVIEW/ROW                                                                      
                                                                                                                                
2:16:18 PM                                                                                                                    
CHAIR FRENCH announced the consideration of HB 215 and asked for                                                                
a motion to adopt the Senate committee substitute, version X.                                                                   
                                                                                                                                
2:16:43 PM                                                                                                                    
SENATOR PASKVAN moved to bring Senate CS for CSHB 215, labeled                                                                  
27-LS0741\X, before the committee for purposes of discussion.                                                                   
                                                                                                                                
CHAIR FRENCH found no objection and recognized the sponsor,                                                                     
Representative Mike Chenault, Speaker of the House.                                                                             
                                                                                                                                
2:17:00 PM                                                                                                                    
REPRESENTATIVE   MIKE  CHENAULT,   Speaker   of   the  House   of                                                               
Representatives and prime  sponsor of HB 215,  read the following                                                               
sponsor   statement  into   the  record:   [Original  punctuation                                                               
provided.]                                                                                                                      
                                                                                                                                
     The  objective of  House Bill  215 is  to prohibit  the                                                                    
     filing  of lawsuits  that have  the potential  to delay                                                                    
     construction  of  in-state   gaslines.  The  provisions                                                                    
     under  House Bill  215 modify  current statute  and the                                                                    
     provisions  only  apply  to state  land  rights-of-way.                                                                    
     Claims may be  filed only by an  applicant, a competing                                                                    
     applicant  of  a  person who  has  a  direct  financial                                                                    
     interest affected  by the lease of  a right-of-way. The                                                                    
     requests for  judicial review must  be filed  within 60                                                                    
     days of  the publication  of notice for  a right-of-way                                                                    
     lease application. Judicial review  may only be granted                                                                    
     for claims  challenging the validity of  the statute or                                                                    
     challenging  a   denial  of  rights  under   the  state                                                                    
     constitution.  Any claim  will be  barred unless  it is                                                                    
     filed within  the 60-day time frame.  The Department of                                                                    
     Environmental Conservation,  under the Clean  Water and                                                                    
     Clean  Air  Acts,  is   exempted  from  the  provisions                                                                    
     pertaining to judicial review.                                                                                             
                                                                                                                                
     All claims  are to be  filed in Alaska  Superior Court,                                                                    
     which  will have  exclusive  jurisdiction to  determine                                                                    
     the   proceeding.  The   court   will   not  have   the                                                                    
     jurisdiction to  grant any  injunctive relief  with the                                                                    
     exception of an issuance of a final judgment.                                                                              
                                                                                                                                
     The  legislation  is  modeled  after  the  Trans-Alaska                                                                    
     Pipeline  legislation, 43  USC,  Chapter  34, that  was                                                                    
     adopted by Congress  in 1973 (43 USC,  Chapter 43, Sec.                                                                    
     1652  (d). Similar  legislation to  House Bill  215 was                                                                    
     passed by the Alaska  State Legislature in 1973, Senate                                                                    
     Bill 3, related to the TAPS line.                                                                                          
                                                                                                                                
     The  bill also  allows the  Alaska Gasline  Development                                                                    
     Authority  (AGDC)   to  move  from  a   common  carrier                                                                    
     requirement to  a contract carrier option.  This change                                                                    
     is  necessary to  pursue a  successful open  season and                                                                    
     project financing for an in-state gasline.                                                                                 
                                                                                                                                
2:19:56 PM                                                                                                                    
TOM WRIGHT,  staff, Representative Mike Chenault,  explained that                                                               
version X reflects  some of the changes that  the House Resources                                                               
Committee made to  HB 9 and changes some provisions  in HB 215 so                                                               
that it only applies to the  AGDC in-state line. This was done by                                                               
adding new subsections that apply only to AGDC.                                                                                 
                                                                                                                                
2:21:37 PM                                                                                                                    
CHAIR FRENCH  asked how much overlap  there was between HB  9 and                                                               
HB 215, version  X, and if both were necessary  to accomplish the                                                               
sponsors' purposes.                                                                                                             
                                                                                                                                
MR. WRIGHT replied three House  bills that are currently residing                                                               
in  the Senate  were incorporated  into HB  9. These  are HB  189                                                               
dealing with confidentiality agreements,  HB 203 that establishes                                                               
the in-state  gas pipeline fund,  and HB  215. If and  when those                                                               
bills advance, they  will be removed from HB 9.  He noted that HB
9 also contains other recommendations  that AGDC and the sponsors                                                               
felt was necessary.                                                                                                             
                                                                                                                                
CHAIR FRENCH  asked him to confirm  that none of the  bills had a                                                               
Senate analog.                                                                                                                  
                                                                                                                                
MR. WRIGHT confirmed there were no analogs.                                                                                     
                                                                                                                                
CHAIR  FRENCH highlighted  that this  was the  first hearing  and                                                               
asked Mr. Wright to proceed as he saw fit.                                                                                      
                                                                                                                                
2:22:59 PM                                                                                                                    
MR. WRIGHT provided a sectional analysis of HB 215.                                                                             
                                                                                                                                
Section  1  amends AS  38.34.050(c),  Cooperation  and access  to                                                               
information. It  adds language that  excludes covenants  found in                                                               
AS 38.35.120[(a)(1), (2)  and (5) from the  covenants required to                                                               
be included in the lease.] It  exempts the AGDC line from being a                                                               
common carrier.  The ability to  be a contract carrier  will work                                                               
to the advantage of shippers and buyers.                                                                                        
                                                                                                                                
SENATOR  PASKVAN asked  what  transitioning  to contract  carrier                                                               
might  do with  gas from  Nenana or  the Yukon  Flats if  it were                                                               
discovered in the next three years, for example.                                                                                
                                                                                                                                
MR. WRIGHT  mentioned the 500  mcf/day limitation under  AGIA and                                                               
confirmed  that  there  had  been   discussions  with  Doyon  and                                                               
Anadarko  about transporting  gas on  an in-state  line. He  then                                                               
deferred the question Mr. Fauske or Mr. Dubler with AGDC.                                                                       
                                                                                                                                
Section  2  amends  AS  38.35.100(d),  Decision  on  application.                                                               
Section  3  amends  AS 38.35.120(a),  Covenants  required  to  be                                                               
included in  lease. Section 4  amends AS  38.35.120(b), Covenants                                                               
required to be included in  lease. These sections have conforming                                                               
changes   and  include   clarifications  and   simplification  of                                                               
language requested by the Department of Law (DOL).                                                                              
                                                                                                                                
Section 5  amends AS 38.35.200,  Judicial review of  decisions of                                                               
commissioner on  application. The  current version X  narrows the                                                               
application  by adding  new subsections.  The new  subsection (c)                                                               
only applies to the in-state  gas pipeline. It allows a competing                                                               
applicant or person with a  direct financial interest affected by                                                               
the lease of a right-of-way to  raise an objection within 60 days                                                               
of the  application or 60 days  after the effective date,  and it                                                               
allows an applicant  standing to seek judicial  review anytime in                                                               
the  process. This  is modeled  after  the Trans-Alaska  Pipeline                                                               
Authorization Act.  Only those who  have standing are  allowed to                                                               
bring an  action alleging that  an action will deny  rights under                                                               
the  state  constitution  or  challenging  the  validity  of  the                                                               
section. The complaint has to be  filed in a state superior court                                                               
and the court may not  grant injunctive relief with the exception                                                               
of a  final judgment. It also  exempts an appeal of  a permitting                                                               
decision by  the Department  of Environmental  Conservation under                                                               
AS 46.03 and AS 46.14 that  is delegated to the department by the                                                               
U.S. Environmental  Protection Agency. He noted  that DEC intends                                                               
to offer several clarifying changes.                                                                                            
                                                                                                                                
Section 6 amends  the uncodified law by adding a  new section for                                                               
transition and  legislative intent. It  says that if  a right-of-                                                               
way lease  is entered into  before the bill passes,  the contract                                                               
that  was  signed  for  the  lease can  be  amended  as  soon  as                                                               
practicable to reflect changes made in this legislation.                                                                        
                                                                                                                                
2:28:32 PM                                                                                                                    
CHAIR FRENCH  reviewed the language  in Section 6  and summarized                                                               
that  a contract  put  in place  before the  bill  passes can  be                                                               
conformed to what is contained in this bill.                                                                                    
                                                                                                                                
MR. WRIGHT agreed.                                                                                                              
                                                                                                                                
SENATOR  WIELECHOWSKI asked  for an  explanation of  the specific                                                               
covenants in AS 38.35.120(a)(1), (2),  and (5) that were excluded                                                               
in Section 2.                                                                                                                   
                                                                                                                                
MR. WRIGHT  deferred to Mr.  Hutchins with the Department  of Law                                                               
(DOL).                                                                                                                          
                                                                                                                                
2:30:45 PM                                                                                                                    
SENATOR PASKVAN asked  if the AGIA statutes had  a provision that                                                               
was comparable to the judicial review in Section 5.                                                                             
                                                                                                                                
MR. WRIGHT  replied the sponsors  indicated they  couldn't recall                                                               
one way of the other.                                                                                                           
                                                                                                                                
2:31:39 PM                                                                                                                    
JOHN HUTCHINS,  Assistant Attorney General, Civil  Division, Oil,                                                               
Gas  and  Mining  Section, Department  of  Law  (DOL),  addressed                                                               
Senator Wielechowski's  question. He explained that  the covenant                                                               
in  AS 38.35.120(a)(1)  requires the  lessee to  become a  common                                                               
carrier. It allows  the state, through contract  with the lessee,                                                               
to impose common carrier regulations on the lessee.                                                                             
                                                                                                                                
SENATOR   WIELECHOWSKI   asked   for  an   explanation   of   the                                                               
significance of common carrier from the standpoint of the state.                                                                
                                                                                                                                
MR.  HUTCHINS  replied a  common  carrier  designation means  the                                                               
operator of the pipeline is required to accept, on non-                                                                         
discriminatory terms, any  gas that is submitted  for shipment on                                                               
the line.  The practice in the  gas industry is that  a line that                                                               
is not  a common carrier is  a contract carrier. As  a rule there                                                               
is an open season and contracts  are entered into for shipment of                                                               
defined quantities of gas at defined terms.                                                                                     
                                                                                                                                
SENATOR WIELECHOWSKI asked  if the bill would  require the lessee                                                               
to be a common carrier.                                                                                                         
                                                                                                                                
MR. HUTCHINS  clarified that the  bill would allow the  lessee to                                                               
operate  the line  without being  a  common carrier.  As a  rule,                                                               
pipelines in  Alaska are required  to operate as  common carriers                                                               
if they have a lease under AS 38.35 over state land.                                                                            
                                                                                                                                
SENATOR  WIELECHOWSKI  questioned why  the  state  would want  to                                                               
grant this exemption.                                                                                                           
                                                                                                                                
MR.  HUTCHINS  replied  it  is  a policy  question  for  AGDC  to                                                               
address, but in general, it is an  issue of how the line can best                                                               
be filled.                                                                                                                      
                                                                                                                                
CHAIR FRENCH  asked if  he was generally  saying that  a pipeline                                                               
that has  a right-of-way  across state  land has  to be  a common                                                               
carrier, and  the paragraph (1)  exemption is because AGDC  has a                                                               
business case interest for needing to be a contract carrier.                                                                    
                                                                                                                                
MR. HUTCHINS said yes.                                                                                                          
                                                                                                                                
CHAIR  FRENCH  asked  for  an explanation  of  the  exemption  in                                                               
paragraph (2).                                                                                                                  
                                                                                                                                
MR.  HUTCHINS  said all  the  exemptions  are related  to  common                                                               
carrier. Paragraph (2) is agreement  by the lessee to interchange                                                               
gas, providing interconnections as  necessary. This would support                                                               
the role as a common carrier.  If someone is required to take gas                                                               
that  is   offered  on  non-discriminatory  terms,   it  is  also                                                               
important  to have  a means  to allow  connections to  a line  to                                                               
enable the shipment of that gas.                                                                                                
                                                                                                                                
CHAIR FRENCH asked the meaning of the word "interchange."                                                                       
                                                                                                                                
MR. HUTCHINS replied he understands it to mean trade.                                                                           
                                                                                                                                
2:35:48 PM                                                                                                                    
CHAIR FRENCH recognized that Representative Hawker was present.                                                                 
                                                                                                                                
SENATOR  WIELECHOWSKI asked  for a  layman's explanation  of what                                                               
covenant in AS 38.35.120(a)(2) would be exempted.                                                                               
                                                                                                                                
MR.  HUTCHINS replied  it  says  AGDC does  not  have to  accept,                                                               
transport, and  allow a  gas supplier  to use  the line  to trade                                                               
with a gas purchaser gas over the line.                                                                                         
                                                                                                                                
SENATOR  WIELECHOWSKI asked  for  an example  of  how that  works                                                               
under current law.                                                                                                              
                                                                                                                                
MR. HUTCHINS offered  a hypothetical example of  an oil discovery                                                               
in a new field on the North Slope  by an explorer that was not an                                                               
owner of the  Trans-Alaska pipeline. That explorer  is allowed to                                                               
submit  that oil  for  transportation  on TAPS  if  it meets  the                                                               
quality requirements of TAPS and pays  the tariff set by the RCA.                                                               
If  that's  done,  TAPS  is  required  to  accept  that  oil  for                                                               
transport.                                                                                                                      
                                                                                                                                
SENATOR WIELECHOWSKI said he was  still trying to understand what                                                               
was being exempted.                                                                                                             
                                                                                                                                
CHAIR FRENCH asked Mr. Balash to supplement the explanation.                                                                    
                                                                                                                                
2:38:30 PM                                                                                                                    
JOE BALASH, Deputy Commissioner,  Department of Natural Resources                                                               
(DNR),  provided  an  explanation   of  the  covenants  under  AS                                                               
38.35.120(a). The covenant under  subsection (a)(1) goes to rates                                                               
and charges  associated with pipeline costs  and fees. Subsection                                                               
(a)(2)  speaks to  the interconnections  that  apply to  multiple                                                               
pipelines that connect with one  another. The policy call made by                                                               
the Legislature through  this statute was to  minimize the number                                                               
of  pipelines  required  to  cross  state  land.  Hopefully  this                                                               
achieves some efficiency  in the economics as  well as minimizing                                                               
the environmental  footprint, he  said. For example,  the Kuparuk                                                               
pipeline  connects to  the  TAPS facilities.  He  said he  wasn't                                                               
aware of  a specific example for  a gas pipeline, but  there were                                                               
perhaps two each in Cook Inlet and the North Slope.                                                                             
                                                                                                                                
CHAIR FRENCH said he was thinking about Beluga and Tyonek.                                                                      
                                                                                                                                
MR.  BALASH pointed  out that  a number  of those  pipelines were                                                               
constructed before AS  38.35 was adopted, so a number  of the gas                                                               
pipelines in Cook Inlet are not bound by that statute.                                                                          
                                                                                                                                
SENATOR PASKVAN offered his  interpretation of subsection (a)(2).                                                               
Subsection (a) says  the pipeline has to accept it  because it is                                                               
a common  carrier and the  rates have  to be fair.  Paragraph (2)                                                               
says the  pipeline has to  provide connections and  facilities at                                                               
every   location   where   they  intersect,   and   that's   what                                                               
"interchange" means.                                                                                                            
                                                                                                                                
MR.  BALASH said  that's right,  and read  together it  gives the                                                               
whole picture of what the covenants mean.                                                                                       
                                                                                                                                
SENATOR  WIELECHOWSKI   questioned  why   it  would  be   in  the                                                               
consumers' interest for AGDC not  to be a common carrier, because                                                               
it would  seem to  be good  for the consumer  to require  them to                                                               
take in any gas. He asked for an explanation of the policy.                                                                     
                                                                                                                                
MR. BALASH  opined that the question  in this case is  whether or                                                               
not  the  consumer will  get  the  service.  In the  natural  gas                                                               
pipeline  business, particularly  a  long haul  pipeline such  as                                                               
being contemplated by  AGDC, financing depends on  the ability to                                                               
enter  into firm  transportation agreements.  The common  carrier                                                               
requirement that has  developed in Alaska is one  that requires a                                                               
pipeline  to  provide  service  on   demand,  as  opposed  to  on                                                               
contract. Because of that requirement,  a shipper may not be able                                                               
to  count on  getting their  product  delivered from  point A  to                                                               
point  B.  He  opined  that  there is  a  need  to  address  that                                                               
constraint,  because  AGDC  has  undertaken the  covenant  in  AS                                                               
38.35.120  through  the right-of-way  that  was  granted in  July                                                               
2011.                                                                                                                           
                                                                                                                                
2:42:13 PM                                                                                                                    
SENATOR  COGHILL  asked  if   this  contemplates  that  long-term                                                               
contracts will  be necessary, that the  line will be full  for an                                                               
extended period, and  that any new exploration  will be thwarted,                                                               
but could stand in line.                                                                                                        
                                                                                                                                
MR. BALASH  suggested he  pose the question  to AGDC  because the                                                               
issue as to whether  or not others may be able  to gain access to                                                               
the pipeline will  depend on the business model  employed and the                                                               
contracts signed.                                                                                                               
                                                                                                                                
SENATOR COGHILL indicated he wanted to proceed with caution.                                                                    
                                                                                                                                
2:43:43 PM                                                                                                                    
MR. BALASH  continued to explain  that subsection  (a)(5) relates                                                               
to the means of providing for  offtake at a wholesale level along                                                               
the pipeline  route. For  example, if  the pipeline  goes through                                                               
Fairbanks,  Senator Paskvan  will  not have  a separate  contract                                                               
with the carrier to get gas  for his home and businesses; it will                                                               
go through the local utility.                                                                                                   
                                                                                                                                
CHAIR  FRENCH  asked if  he  was  saying that  subsection  (a)(5)                                                               
requires going through a local  utility and that the bill exempts                                                               
that requirement.                                                                                                               
                                                                                                                                
MR.  BALASH said  no, and  clarified that  it relates  to offtake                                                               
points  along  the  pipeline as  determined  [by  the  Regulatory                                                               
Commission  of Alaska  (RCA)] under  AS 42.06.340,  which is  the                                                               
Pipeline Act.                                                                                                                   
                                                                                                                                
SENATOR  WIELECHOWSKI  asked if  the  result  of this  particular                                                               
exemption would be to remove  RCA regulation over the pipeline in                                                               
this section.                                                                                                                   
                                                                                                                                
MR. BALASH replied  he didn't believe that was  the case; rather,                                                               
it was just with regard to this specific reference in this bill.                                                                
                                                                                                                                
2:45:18 PM                                                                                                                    
SENATOR PASKVAN  questioned whether, under this  provision, there                                                               
would be  no obligation to  provide a connection at  Fairbanks if                                                               
the  first open  season is  contracted with  export only  and the                                                               
pipeline is at capacity.                                                                                                        
                                                                                                                                
MR. BALASH  expressed uncertainty  about that, because  a project                                                               
with a significant export component  would already be exempt from                                                               
the common carrier requirements.                                                                                                
                                                                                                                                
2:46:36 PM                                                                                                                    
At ease from 2:46:36 p.m. to 2:47:10 p.m.                                                                                       
                                                                                                                                
MR. BALASH  directed attention to  AS 38.35.120(a)(1)(A)  and the                                                               
current  CS, version  X, on  page  3, lines  8-14. That  language                                                               
exempts a  lessee that  owns or operates  a natural  gas pipeline                                                               
from  the  common  carrier   requirement.  In  Senator  Paskvan's                                                               
hypothetical,  RCA  would  be preempted  by  the  Federal  Energy                                                               
Regulatory Commission (FERC).                                                                                                   
                                                                                                                                
CHAIR FRENCH  asked if subsection (a)(7)  provides exemption from                                                               
RCA and puts regulatory authority under FERC.                                                                                   
                                                                                                                                
MR. BALASH agreed FERC jurisdiction  would apply if it is granted                                                               
under the natural gas act.                                                                                                      
                                                                                                                                
CHAIR FRENCH  summarized that FERC  jurisdiction would  apply for                                                               
exported gas, and Mr. Balash agreed.                                                                                            
                                                                                                                                
He asked if the in-state portion  of the gas would be exempt from                                                               
RCA.                                                                                                                            
                                                                                                                                
2:48:33 PM                                                                                                                    
MR. HUTCHINS  confirmed that the  in-state portion of the  gas is                                                               
exempted  from the  common carrier  regulation. The  Pipeline Act                                                               
establishes that  the RCA  regulates common  carriers and  sets a                                                               
tariff,  but it  is  not  set up  to  price  regulate a  contract                                                               
carrier.  He offered  his understanding  that  the sponsors  were                                                               
considering adding  conceptual amendments  to HB  215 to  allow a                                                               
mechanism for  contract carrier price  regulation by the  RCA. He                                                               
continued  that  this  specific  provision,  covenant  (7),  does                                                               
remove the  agreement by the  lessee to submit to  RCA regulation                                                               
of tariffs in this context.                                                                                                     
                                                                                                                                
MR. BALASH clarified  that the bill does not  exempt the Pipeline                                                               
Act, AS  42.06; the lessee's  obligation to submit  to regulation                                                               
under AS 42.06 is what is being exempted.                                                                                       
                                                                                                                                
SENATOR WIELECHOWSKI asked how tariffs would be calculated.                                                                     
                                                                                                                                
MR. HUTCHINS explained the open season process.                                                                                 
                                                                                                                                
CHAIR   FRENCH  posed   a  hypothetical   example  where   ENSTAR                                                               
contracted to get gas from the North Slope.                                                                                     
                                                                                                                                
2:51:05 PM                                                                                                                    
MR.  HUTCHINS  confirmed  the  contract would  be  with  AGDC  or                                                               
whatever entity owned the pipeline.                                                                                             
                                                                                                                                
CHAIR FRENCH asked if it was fair  to say that, at this point, it                                                               
was unclear who would own the pipeline.                                                                                         
                                                                                                                                
MR. BALASH responded that the  legislation specifically refers to                                                               
a right-of-way owned by AGDC.                                                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI  questioned whether it wouldn't  be good for                                                               
consumers if  there was  a mechanism like  RCA to  sideboard what                                                               
tariff could be charged.                                                                                                        
                                                                                                                                
MR. BALASH agreed  that was a policy decision, but  the fact that                                                               
AGDC is a state corporation offers some natural protections.                                                                    
                                                                                                                                
SENATOR WIELECHOWSKI  asked if the bill  provides some protection                                                               
in the event that AGDC no longer owns the line                                                                                  
                                                                                                                                
2:54:00 PM                                                                                                                    
MR. BALASH deferred the question.                                                                                               
                                                                                                                                
MR. HUTCHINS said that the  transfer of the right-of-way requires                                                               
the approval of the commissioner under AS 38.35.120(a)(9).                                                                      
                                                                                                                                
SENATOR WIELECHOWSKI  asked if some  sort of  consumer protection                                                               
conditions  would be  set on  the rates  if AGDC  transferred the                                                               
pipeline to ENSTAR, for example.                                                                                                
                                                                                                                                
MR. HUTCHINS replied  absent some other regulation,  HB 215 would                                                               
allow ENSTAR to enter into  negotiations for transport of gas and                                                               
would not restrict the contracts ENSTAR might enter into.                                                                       
                                                                                                                                
MR. WRIGHT suggested that Mr.  Dubler and Mr. Fauske address some                                                               
of the committee's questions.                                                                                                   
                                                                                                                                
2:55:52 PM                                                                                                                    
DAN FAUSKE,  CEO, Alaska Housing  Finance Corporation  (AHFC) and                                                               
President,   Alaska  Gasline   Development  Corporation   (AGDC),                                                               
introduced himself.                                                                                                             
                                                                                                                                
JOE DUBLER,  Vice President and  Chief Financial  Officer, Alaska                                                               
Gasline Development Corporation, introduced himself.                                                                            
                                                                                                                                
MR. FAUSKE  addressed the contract  carrier issues  reminding the                                                               
committee  that  financing  is envisioned  through  the  sale  of                                                               
revenue bonds  and that the  line is  limited to 500  mcf/day. He                                                               
mentioned discussions with Doyon,  Limited regarding their Nenana                                                               
Basin field and noted that it resides below the 68th parallel.                                                                  
                                                                                                                                
CHAIR  FRENCH clarified  that someone  could build  a larger  gas                                                               
pipeline  from the  North  Slope, it  just  wouldn't qualify  for                                                               
preferential  state   support  that  was  granted   to  the  AGIA                                                               
licensee.                                                                                                                       
                                                                                                                                
MR. FAUSKE agreed.                                                                                                              
                                                                                                                                
SENATOR  WIELECHOWSKI  asked if  he  had  a legal  opinion  about                                                               
whether or not it would violate  AGIA to bring 500 mcf/day of gas                                                               
from  the North  Slope and  an equal  amount off  the flats  from                                                               
Doyon, Limited.                                                                                                                 
                                                                                                                                
MR DUBLER  replied they did  not solicit a legal  opinion because                                                               
the  law is  very clear  that AGIA  only applies  above the  68th                                                               
parallel, and the foothills is well south of that.                                                                              
                                                                                                                                
MR.  FAUSKE highlighted  that similar  discussions took  place in                                                               
reference to potential  findings in Cook Inlet.  AGDC envisions a                                                               
commercial entity  at the  end of  the line  to make  the tariffs                                                               
affordable to Alaskans. Judging  from a confidential, non-binding                                                               
expression of interest meeting in July  2011, the line will be at                                                               
full  capacity.   That  is   critically  important   for  Alaskan                                                               
consumers.                                                                                                                      
                                                                                                                                
He continued to discuss the  tariff issue. Front end loaded (FEL)                                                               
1 has been  completed and after stage 3 the  project will or will                                                               
not  be  sanctioned.  He  spoke in  support  of  the  independent                                                               
project analysis (IPA)  on mega projects because  the project can                                                               
be halted  anytime it doesn't  make economic sense.  He continued                                                               
that the  costs were currently  plus or  minus 30 percent  on the                                                               
$7.5 billion project  and the goal at sanction was  to be at plus                                                               
or minus  10 percent. Under  the current analysis the  tariff for                                                               
Fairbanks  would be  about $10.33/mcf,  whereas the  cost now  is                                                               
$23.33/mcf.  The   tariff  for  Anchorage  is   estimated  to  be                                                               
$9.63/mcf.  He discussed  straddle plants  in both  locations and                                                               
the difference in  cost due to economies of scale.  He noted that                                                               
the tariff estimates were based on a 70/30 debt-equity ratio.                                                                   
                                                                                                                                
MR. FAUSKE stated  that he wanted the record to  reflect that the                                                               
only money being contemplated by  the state for this $7.5 billion                                                               
project  is $400  million  to get  to FEL  3.  Beyond that  point                                                               
financing  will  be  through  the   sale  of  revenue  bonds.  He                                                               
highlighted that that goes back  to the contract carrier issue in                                                               
order to  get financing.  It would be  impossible to  finance the                                                               
project  under  common  carrier  requirements  because  investors                                                               
and/or companies would  not be willing to risk  that things could                                                               
change at any time.                                                                                                             
                                                                                                                                
CHAIR FRENCH held HB 215 in committee.                                                                                          

Document Name Date/Time Subjects
HB6 Supporting Documents-Memo Legal Services 04-17-07.pdf HJUD 3/21/2011 1:00:00 PM
SJUD 3/5/2012 1:30:00 PM
HB 6
HB6 Supporting Documents-Opinion (Informal) AG 02-02-07.pdf HJUD 3/21/2011 1:00:00 PM
SJUD 3/5/2012 1:30:00 PM
HB 6
Sponsor Statement for HB 6.pdf SJUD 3/5/2012 1:30:00 PM
HB 6
HB 6 Sectional Analysis for O version.pdf SJUD 3/5/2012 1:30:00 PM
HB 6
Sponsor Statement-CSHB 215 (JUD) am.pdf SJUD 3/5/2012 1:30:00 PM
HB 215
Sectional Analysis-CSHB 215 (JUD) am.pdf SJUD 3/5/2012 1:30:00 PM
HB 215
Hb 215 legal document Moore V. State.pdf SJUD 3/5/2012 1:30:00 PM
HB 215
HB 215 Leg Legal review 04.15.11.pdf SJUD 3/5/2012 1:30:00 PM
HB 215
HB 215 SCS work draft.pdf SJUD 3/5/2012 1:30:00 PM
HB 215