Legislature(2001 - 2002)

04/02/2001 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  SB  76-RIGHT-OF-WAY LEASING ACT                                                                           
                                                                                                                              
CHAIRMAN  JOHN  TORGERSON  called  the  Senate  Resources  Committee                                                          
meeting  to order  at 3:35 p.m.  and announced  SB 76  to be up  for                                                            
consideration.                                                                                                                  
                                                                                                                                
SENATOR  THERRIAULT,  sponsor  of  SB  76,  said  since  the  bill's                                                            
introduction,  the Administration  has carried on negotiations  with                                                            
officials  at  Alyeska  regarding  terms.  All have  agreed  to  the                                                            
language  in the sponsor  substitute. He  explained the contents  of                                                            
the bill as follows.                                                                                                            
                                                                                                                                
Section  1 modifies  the  length in  which a  lease  for a  pipeline                                                            
right-of-way  can be granted from  10 years to 30 years.  That would                                                            
conform to federal law.  He thought it made sense to conform our law                                                            
to federal laws so that  pipelines that cross both state and federal                                                            
lines  would  be  assured  they  have  a right-of-way   to  continue                                                            
operations.                                                                                                                     
                                                                                                                                
Section  2  deals  with  the  issue of  how  to  deal  with  ongoing                                                            
negotiations that  exceed the original lease length.  The state does                                                            
not want to be  subject to litigation just because  negotiations are                                                            
ongoing.                                                                                                                        
                                                                                                                                
Section  3 deals  with  reimbursements  of  the state's  expense  in                                                            
negotiating  for  a  lease  extension,  language  that  was  in  the                                                            
Governor's original bill.                                                                                                       
                                                                                                                                
Section 4 deals with the  definition of state land and rights-of-way                                                            
across it.                                                                                                                      
                                                                                                                                
Section  5 deals with  the 30 years  applicable  to leases that  are                                                            
currently in existence.                                                                                                         
                                                                                                                                
SENATOR ELTON  asked if there is a definition in statute  of "timely                                                            
requested."                                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT answered  that there  is no  definition of  that                                                            
term in statute but there  is one in regulation that says two years.                                                            
He thought  the committee  might want to  allow some flexibility  in                                                            
regard to the TransAlaska pipeline.                                                                                             
                                                                                                                                
SENATOR LINCOLN  said the fiscal note indicates a  potential savings                                                            
to the state  that would  begin to accrue  in 2014. She asked  if he                                                            
had any idea what the cost savings would be.                                                                                    
                                                                                                                                
SENATOR THERRIAULT  replied, "The expense of the permitting  process                                                            
will  get rolled  into  the tariff  that is  paid  for shipping  the                                                            
product down the  line. That impacts on the state  treasury, because                                                            
it reduces  the  wellhead  value. It  doesn't start  accruing  until                                                            
then, because right now  if existing law continued, it would be back                                                            
before us in 10 years…"                                                                                                         
                                                                                                                                
MR. STEVE JONES,  TransAlaska Pipeline  System right-of-way  renewal                                                            
project manager, stated  support for SB 76 and pointed out that they                                                            
had  spent the  last  month  and a  half working  on  language  that                                                            
everyone would be happy with.                                                                                                   
                                                                                                                                
MR. BILL BRITT,  State Pipeline Coordinator,  stated support  for SB
76.  Regarding Senator  Elton's  question  about the  term,  "timely                                                            
requested,"  the  Right-of-way  Leasing Act  only applies  to  large                                                            
common  carrier oil  and gas  pipelines and  does not  apply to  the                                                            
smaller gathering lines.                                                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  asked what his  intentions are for the  renewal,                                                            
which says up to 30 years.                                                                                                      
                                                                                                                                
MR. BRITT answered  they would first have to receive  an application                                                            
and the applicant would  request the term of renewal. He presumes it                                                            
will be  30 years. He said  they are in  the process of cooperating                                                             
with Alyeska  to do a  reliability center  maintenance study,  which                                                            
will give them  the exact physical  condition of what they  consider                                                            
to be  the critical  systems on  the TransAlaska  Pipeline. He  also                                                            
pointed  out that  five other pipeline  right-of-way  leases on  the                                                            
North Slope  expire on the  same day as  the TransAlaska  Pipeline's                                                            
right-of-way lease. DNR  will have to deal with those five pipelines                                                            
at the same time.                                                                                                               
                                                                                                                                
CHAIRMAN TORGERSON  asked what DNR  will do if they are found  to be                                                            
out of  compliance with  the lease  and they have  signed a  30-year                                                            
lease.                                                                                                                          
                                                                                                                                
MR. BRITT  said he presumed  Senator Torgerson  meant they had  a 30                                                            
year  lease  and  encountered   a problem   after  the  renewal.  He                                                            
explained  the lease has a  number of tools  so that, "We can  issue                                                            
orders directing  Alyeska to take specific actions."  They have done                                                            
this a number  of times and  Alyeska has responded  to every  one of                                                            
those.                                                                                                                          
                                                                                                                                
MR. BRITT explained,  "Should that  fail, we have the ability  to go                                                            
perform  the work  ourselves  and bill  the operator  for doing  the                                                            
work. Should the operator  not respond, we have the ability to go to                                                            
court and  a whole  series of tools  we can use  to affect  whatever                                                            
change we think is necessary."                                                                                                  
                                                                                                                                
SENATOR  LINCOLN asked  how many times  the state  has utilized  the                                                            
"recourse" he is talking about.                                                                                                 
                                                                                                                                
MR. BRITT said  he has been employed  in this position for  the last                                                            
four years  and prior to  that some actions  were taken. During  his                                                            
term, he has issued about  10 directives instructing Alyeska to take                                                            
specific actions. No further steps needed to be taken.                                                                          
                                                                                                                                
SENATOR ELTON asked if he supports the legislation.                                                                             
                                                                                                                                
MR. BRITT responded that he does support it.                                                                                    
                                                                                                                                
SENATOR ELTON asked his definition of "timely requested."                                                                       
                                                                                                                                
MR. BRITT stated that DNR  has recently promulgated regulations that                                                            
ask  that  applications   be  submitted  two  years   prior  to  the                                                            
expiration  of the  lease  and that  would  be his  definition.  The                                                            
regulations  allow  the commissioner  to  waive that  period  should                                                            
circumstances  warrant a waiver.  He reiterated  for the purpose  of                                                            
this bill, he is only talking about the big pipelines.                                                                          
                                                                                                                                
SENATOR  ELTON asked  how  he would  define  a feeder  line off  the                                                            
pipeline, like the feeder line to Williams.                                                                                     
                                                                                                                                
MR. BRITT told  members DNR does not have a separate  lease for that                                                            
line; it is covered by the TAPS right-of-way lease.                                                                             
                                                                                                                                
Number 1000                                                                                                                     
                                                                                                                                
SENATOR PEARCE  moved to pass SSSB  76 from committee with  its zero                                                            
fiscal   note  and  individual   recommendations.   There  were   no                                                            
objections and it was so ordered.                                                                                               

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