Legislature(2013 - 2014)BELTZ 105 (TSBldg)
02/18/2014 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB159 | |
| SB99 | |
| SB140 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 159 | TELECONFERENCED | |
| *+ | SB 99 | TELECONFERENCED | |
| *+ | SB 140 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 99-AIDEA: DEVELOPMENT LOANS
2:03:39 PM
CO-CHAIR DUNLEAVY announced the consideration of SB 99."An Act
correcting a reference to the Alaska Industrial Development and
Export Authority revolving fund; limiting the use of the Alaska
Industrial Development and Export Authority sustainable energy
transmission and supply development fund for certain loans and
loan guarantees and allowing the development fund to be used as
security for a bond guarantee; and amending the definition of
'qualified energy development.'" This was the first hearing.
2:03:58 PM
JESSE LOGAN, Staff, Senator Lesil McGuire, introduced SB 99 on
behalf of the sponsor. He spoke to the following sponsor
statement: [Original punctuation provided.]
The Sustainable Energy Transmission and Supply (SETS)
Development Fund was created in 2012, AS 44.88.650-
44.88.690, as a fund within the Alaska Industrial
Development and Export Authority (AIDEA) to promote
and provide financing for energy development in the
state to alleviate unemployment and contribute to the
state's economic welfare, economic diversity, and
economic development. Under this statute AIDEA is
authorized to use money in the SETS fund to assist in
the construction, improvement, rehabilitation, and
expansion of qualified energy developments.
SB 99 provides technical amendments to the SETS
Development Fund within AIDEA. It has been determined
that the statutes, as written last year, created an
ambiguity in the one third capital cost limit as it
relates to loans, loan guarantees and bond guarantees.
The ambiguity arises in the current statutes as to
whether the $20 million loan limitation worked in
conjunction as a one-third limitation on loan
guarantees, or was independent of that limitation.
Additionally, the statute was vague as it relates to
AIDEA's authority to use the fund as a security for a
bond guarantee. These amendments clarify these
ambiguities.
AIDEA has received requests from project components
and banks to utilize the fund in which AIDEA needed
the authority to issue a bond guarantee for more than
one-third of project costs. This bill clarifies the
types of financing and limitations for financing for
qualified energy developments in the state.
2:07:14 PM
MR. LOGAN reviewed the proposed changes to the existing statute.
· On page 2, line 3, the word "loan" was deleted to reflect
the correct name of the revolving fund.
· Page 2, lines 15-17, contains additional language that
specifies that this section only applies to the SETS
program and not any other within AIDEA.
· On page 2, line 17, the words "finance or participate in
financing of" was deleted to clarify that paragraphs (1)
and (2) of AS 44.88.690(a) found on page 2, lines 18-21,
pertain only to loans and loan guarantees, and not general
finance participation. The provision in paragraph (1)
specifies that AIDEA cannot grant a loan for more than one-
third of the cost of a qualified energy development
project. The language in paragraph (2) clarifies that the
loan guarantee cannot exceed $20,000.
· On page 2, line 28, the term "project" was changed to
"development" to clarify that "qualified energy
development" means a development in the state, rather than
a project.
· Section 3 on page 2 specifies that the program can be used
for a security of a bond guarantee.
2:09:40 PM
MARK DAVIS, Deputy Director, Alaska Industrial Development and
Export Authority, (AIDEA), stated agreement with Mr. Logan's
description of SB 99. He added that the bill was requested by
the financial institutions that AIDEA works with.
2:10:33 PM
At ease
2:12:02 PM
CHAIR DUNLEAVY reconvened the meeting and asked Senator Stedman
if he had an amendment to offer.
2:12:14 PM
SENATOR STEDMAN moved Amendment 1, labeled 28-LS0741\A.3.
CHAIR DUNLEAVY objected for discussion purposes.
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR STEDMAN
TO: SB 99
Page 1, line 5, following "guarantee;":
Delete "and"
Page 1, line 6:
Delete "development.'"
Insert "development'; and authorizing the Alaska
Industrial Development and Export Authority to issue
bonds to finance the infrastructure and construction
costs of the Bokan-Dotson Ridge rare earth element
project."
Page 3, following line 4:
Insert a new bill section to read:
"* Sec. 5. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE APPROVAL; BOKAN-DOTSON RIDGE RARE
EARTH ELEMENT PROJECT. (a) The Alaska Industrial
Development and Export Authority may issue bonds to
finance the infrastructure and construction costs of
the Bokan-Dotson Ridge rare earth element project. The
Bokan-Dotson Ridge rare earth element project shall be
owned by the authority and financed under AS 44.88.172
- 44.88.177. The principal amount of the bonds
provided by the authority for the Bokan-Dotson Ridge
rare earth element project may not exceed $145,000,000
and may include the costs of issuing bonds considered
reasonable and appropriate by the Alaska Industrial
Development and Export Authority.
(b) This section constitutes legislative
approval required by AS 44.88.095(g)."
SENATOR STEDMAN explained that the amendment authorizes AIDEA to
issue bonds to finance the infrastructure and construction of
the Bokan-Dotson Ridge Rare Earth Element Project. He read the
above amendment.
He highlighted the permissive language giving AIDEA discretion
in its bonding authority, up to $145 million. He also noted that
he had an amendment to clarify some of the language in Amendment
1.
2:15:09 PM
SENATOR OLSON asked if AIDEA has an opinion on the amendment.
SENATOR STEDMAN replied he worked with AIDEA on the amendment,
but would prefer to hear from them directly.
MR. DAVIS said AIDEA has no objection to the amendment, but
would suggest additional clarification that AIDEA could use the
bonds for ownership or financing.
SENATOR OLSON asked if the sponsor has an opinion on the
amendment.
2:16:08 PM
SENATOR LESIL MCGUIRE, sponsor of SB 99, stated support for
Amendment 1.
SENATOR MICCICHE asked the total in the SETS fund.
MR. DAVIS replied the SETS fund total is $67.5 million.
Responding to a further question, he explained that this
authorizes the AIDEA Board, in its discretion, to issue SETS
bonds that would be sold on the private market.
SENATOR MICCICHE referenced AS 44.88.095(g) and highlighted that
this project wouldn't come back before the legislature. It gives
AIDEA the authority to bond up to $145 million.
MR. DAVIS agreed; this is asking for legislative approval for an
upper limit.
SENATOR MICCICHE asked if it's typical that bonding authority at
this level wouldn't come back to the legislature.
MR. DAVIS confirmed this is the process, and explained that the
Skagway ore terminal was a similar project. AIDEA asked for and
received authorization to issue up to $80 million in bonds for
that project, although the full bonding has not been used.
2:18:21 PM
CHAIR DUNLEAVY removed his objection. Finding no further
objection, Amendment 1 was adopted.
2:18:35 PM
SENATOR STEDMAN moved [conceptual] Amendment 2. He explained
that it amends Amendment 1.
CO-CHAIR DUNLEAVY objected for discussion purposes.
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR STEDMAN
TO: Amendment 1, 28-LS0741\A.3, for SB 99
Page 1, line 17:
Following: "Bokan-Dotson Ridge rare earth element"
Delete: "project shall be owned"
Insert: projects surface complex shall be owned or
financed"
SENATOR STEDMAN described the above amendment.
2:19:36 PM
SENATOR OLSON asked if other projects would be affected by the
amendment.
MR. DAVIS replied that this authority is specific to the Bokan
project. Amendment 2 clarifies that AIDEA has determined that it
can only lend on the surface and could not use bonding for
working capital or underground equipment that might be used in
the mine. He noted that the idea of financing to ownership was
his suggestion.
SENATOR OLSON asked for assurance this wouldn't encumber the Red
Dog Mine and the connecting road.
MR. DAVIS replied this would not affect that mine; it only gives
authorization for the Bokan project.
SENATOR MICCICHE asked if it's unlikely that a state agency
would operate this project, although it's authorized under AS
44.88.172 - 44.88.177.
MR. DAVIS confirmed that those statutes, particularly AS
44.88.172(a), permit AIDEA to own or partially own or finance a
project. However, AIDEA usually contracts projects out or seeks
private partners so another entity operates the project.
2:23:26 PM
CHAIR DUNLEAVY removed his objection and Amendment 2 was
adopted.
2:24:04 PM
KEN COLLISON, Chief Operating Officer, Ucore Rare Metals,
introduced himself.
SENATOR STEDMAN asked Mr. Collison to describe the Bokan-Dotson
Ridge Rare Earth Project.
MR. COLLISON explained that there are about 16 elements in the
periodic table that are classified as light and heavy rare earth
elements (REEs), but only the heavy REEs are rare and critical
to both green energy and the military. Right now more than 95
percent of the heavy rare earths originate in China, so there is
impetus to create a "Made in the USA" supply of rare earths.
Ucore is part of that effort and has contracts with both the
Department of Defense and the Department of Energy to further
that goal.
MR. COLLISON said that a preliminary economic assessment of the
Bokan-Dotson Ridge Rare Earth Project ("Project") predicts
capital costs of $221 million. Upon review with AIDEA, it was
determined that $191 million could be bonded, but AIDEA is only
authorized to bond 75 percent of that. Thus, the $145 million
provided in Amendment 1.
He explained that the Project is a 1,500 ton/day underground
mine that uses new technology so there will be no tailings left
on the surface when the mine closes. The timeline calls for
permitting to begin late in the first quarter of this year or
soon thereafter. He expressed hope that the mine would be
permitted more quickly than others since it's underground, has a
very small footprint, and will have no tailings on the surface
at closure. The feasibility study and the engineering for some
of the major equipment will run concurrently and should be
finished by year end. Down payments on the major equipment will
be due shortly thereafter so that it doesn't hold up the
project.
MR. COLLISON said this legislation will be a big help in
developing the Project, and it will show the financial markets
and the rest of the mining industry that Alaska is open for
business. The state will also benefit from additional jobs.
During the estimated 1.5 year construction, the onsite workforce
will peak at about 300 employees, which will create about 125
indirect jobs. During operations there will be about 190
employees and that should create about 150 indirect jobs.
Current estimates indicate that about 340 new jobs will be
created in the state. In Alaska, the average income for somebody
in mining is between $80,000 and $100,000 so these are very
good, year around jobs.
CO-CHAIR DUNLEAVY asked the predicted life of the mine.
MR. COLLISON replied it's 11 years but if mines like Greens
Creek and Red Dog are indicative, it will last several times
longer than that. It's promising that the ore body is open at
depth and on strike and that the property has numerous other
rare earth showings.
2:29:30 PM
SENATOR MICCICHE referenced a handout in the packets that
specifically identifies Dy, Tb, and Y as heavy rare earth
elements available at Bokan Mountain. He requested an expanded
discussion of REEs.
MR. COLLISON identified the three REEs as dysprosium, terbium,
and neodymium. He explained that one of their uses is to reduce
the size of magnets, which is critical for things like hybrid
cars and aviation engines. The Department of Energy has
identified these three rare earths and inyttrium as the most
critical for [military equipment]. The Department of Defense has
identified them as "subject to interruption of supply, based on
actions or events outside the control of the government of the
United States."
SENATOR MICCICHE asked if the mine is economically feasible at
the indicated resource quantities or if inferred resources have
to be included.
MR. COLLISON replied the preliminary economic assessment was
done on inferred resources, as is common. Ucore has since done
more drilling and now has both indicated and inferred resources.
Another drill program this coming summer will move the balance
of inferred resources to indicated resources, and add some. It's
necessary to have at least an indicated resource in order to do
a feasibility study, so that's the intent this coming summer, he
said.
CO-CHAIR DUNLEAVY stated that public testimony would remain open
and he would hold SB 99 in committee for further consideration.