Legislature(2009 - 2010)BUTROVICH 205
04/01/2010 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB143 | |
| Overview from Administration on In-state Gas | |
| Overview: Export License Issues | |
| HB369 | |
| Presentation by Larry Persily, Federal Coordinator for Alaska Natural Gas Transportation Projects | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| + | HB 369 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 143 | ||
HB 369-IN-STATE PIPELINE/ MANAGER/TEAM
5:02:04 PM
CO-CHAIR MCGUIRE announced HB 369 to be up for consideration
[CSHB 369(FIN) AM was before the committee].
REPRESENTATIVE CHENAULT, sponsor of HB 369, offered that he is a
"hands on kinda guy" and he wants to start "turning dirt." He
explained that this bill forms a joint in-state gas development
team (JIGDT). It would be found in the Office of the Governor
and consist of the chief executive officer (CEO) of the AHFC as
chair, the CEO of Alaska Railroad or his designee, the
commissioner of the Department of Transportation and Public
Facilities (DOTPF) or his designee, the CEO of the ANGDA, and
the in-state gas line coordinator or project manager.
5:03:31 PM
The bill also describes the duties of the in-state gasline
coordinator in statute and sets the deadline of July 1, 2011 to
assure that a project plan is presented back to the legislature.
The project plan would specify how an in-state line can be
designed and built made operational by December 31, 2015. These
are aggressive dates, but they won't get to completion of a
project without a timeline. The project plan must also include
specific plans to coordinate and facilitate the construction,
ownership, operation and management of a gasline. They tried to
leave these as loose as they could, because he has found that
when the politicians get involved in projects like this, they
tend to be the problem.
He said the development team is to prepare plans and designs
necessary for construction, to coordinate with the entities
qualified to build, own or operate a pipeline, and select the
route; the route is to be the most economical, provide gas to
residents at a reasonable cost, and to use state lands and
rights-of-way to the maximum extent possible. It also
establishes an expedited process for information access and
cooperation among the state entities. It outlines the duties of
the development team, but gives them some flexibility to
determine what actions are necessary to complete the project
without politicians being involved.
5:05:51 PM
REPRESENTATIVE CHENAULT said he feels the need to combine the
efforts to move an in-state gas line forward not only for the
funding purposes but to gather information and studies and to
share them in order to turn dirt.
REPRESENTATIVE CHENAULT said the in-state gas line would provide
economic opportunity for Alaska and will supply the energy needs
for Alaskans for many years.
5:06:54 PM
CO-CHAIR MCGUIRE said they are trying to figure out how many
captains and who is going where with what intent, and she looked
forward to his input.
5:07:55 PM
REPRESENTATIVE CHENAULT agreed that one of the big problems is
too many chiefs and not enough Indians. This project needs a
strong leader who can make those determinations. It has to have
a supportive administration and the legislature behind it. He
thought it imperative that they consider that the state has
tried for over 30 years to try to secure Alaska's energy needs
and it no longer has the luxury of discussing it. It is time to
turn it over to experts.
5:09:51 PM
SENATOR HUGGINS agreed with Speaker Chenault's opinion that they
need to get a strong leader and let him do the job.
5:10:42 PM
REPRESENTATIVE CHENAULT said we have some of the best minds in
the state; there is no reason a project can't be brought back.
CO-CHAIR MCGUIRE agreed and said she looked forward to working
with him. She conceded that the timelines are aggressive but she
believed Alaskans want something to move forward now.
5:11:48 PM
SENATOR WIELECHOWSKI referred to Mr. Heinze presentation that
estimated the tariff at 250 mmcf/d would be $9.24 plus $1.50-$2
for the gas treatment plant. Bumping it up to 500 mmcf/d, you
still have a $6 tariff plus the cost of the gas. He asked how HB
369 deals with a possible $10 tariff a couple of years down the
road.
5:12:44 PM
REPRESENTATIVE CHENAULT said he didn't have a good answer to
that. The question can be asked what do they tell their
constituents in 2018 when they have no gas. He had no reason to
doubt Mr. Heinze's numbers, but he wanted to see what the
project looks like. As the numbers change so do the
opportunities. He would like to build a bigger line but he
thought that should be left to the experts.
5:14:43 PM
SENATOR FRENCH said they will have the estimates by July 1 and
asked why the current structure is not sufficient to get this
going.
REPRESENTATIVE CHENAULT answered that they have heard for a
number of years through different agencies; ANGDA for instance
was ready to go forward but then the legislature chose not to
fund him on certain issues. They didn't think they were getting
anywhere and that is how they came up with the in-state pipeline
coordinator, and that agency has been in turmoil even though he
respects Mr. Noah. The legislature needs to continue to keep
"our thumb on" the task that not only the administration but the
departments are tasked with, then what they get in July may be
the answers they are looking for, but maybe not. The 2011 date
could get pushed out further. He wasn't interested in hurting
the AGIA project's chances to go through, and he didn't see it
being derailed by an in-state gas project such as this.
5:18:12 PM
SENATOR HUGGINS agreed with Representative Chenault. Who
deserves the gas first? Alaskans! Spending the money on AGIA is
fine, but he was willing to spend the same amount to get gas to
Alaskans.
CO-CHAIR MCGUIRE said she thought the speaker was right; the
legislature needed to set milestones in order to keep this on
track. They both put July 1, 2011 in the bill out of respect for
the governor but she wanted to have further talks with the
engineers because they are saying more field work needs to be
done in the summer.
REPRESENTATIVE CHENAULT agreed, but said that if they leave a
project totally up to the engineers nothing will ever get done.
Engineers look for perfection and, while he respects that, there
was not going to be perfection. He thought that others need to
be working with them to make the decisions.
CO-CHAIR MCGUIRE agreed that a team is needed. With that, she
set HB 369 aside and said they would hear from Larry Persily.
^Presentation by Larry Persily, Federal Coordinator for Alaska
Natural Gas Transportation Projects
5:22:57 PM
LARRY PERSILY, Federal Coordinator, Office of the Federal
Coordinator for Alaska Natural Gas Transportation Projects, said
he had two presentations, one about the rules dealing with an
export license that you have to get from the federal government
if you're going to send natural gas overseas, and the other that
talks about is going on in the world LNG markets.
MR. PERSILY stated that since 1938 exporting natural gas from
the United State required an export license issued by the US
Department of Energy (DOE). It must show that sending your gas
overseas is consistent with the public interest. You have to
show basically that there is a surplus, that it is available and
not needed domestically. The DOE license for export at the Kenai
plant was last issued in 2009 with a two-year renewal and is
valid until March 31, 2011. It took almost 1.5 years to get.
Initially in 1996 when the plant owners filed for a renewal it
took 2.5 years.
He said the state originally opposed the last renewal (2007) and
later dropped its protest. Chugach Electric opposed the renewal
as did others. The state initially asked for trial-type
procedures with discovery - as did Tesoro which also wanted
evidentiary trial-type proceedings. Chugach Electric was in
negotiation with the producers at that time for supply contracts
and wanted the state to continue opposing the export permit so
as to strengthen their hand as they negotiate supply contracts
with Marathon and ConocoPhillips. All that is to say that,
without protests you can get an export license a lot sooner than
1.5 years.
MR. PERSILY explained that it is an administrative action, not
congressional. It is the second export license that exists in
Alaska. Twenty-one years ago the DOE approved an export permit
for Yukon Pacific which at that time envisioned an LNG project.
That export permit specified the gas could go to Japan, South
Korea or Taiwan. (Export licenses granted by the Department of
Energy actually specify which countries it can be sent to.) That
license in 1989 was for a specific project, with specific
owners, at a specific time. A change in ownership of the license
would require Department of Energy approval - his opinion, not
the Office of Federal Coordinator - but considering the changes
in market conditions, supplies, economics and such in the 21
years, it's doubtful the DOE would simply okay the transfer of
that license to a new owner who would have to go back through
the process.
SENATOR FRENCH asked the volume allowed under that permit.
MR. PERSILY said he didn't remember. Even though export licenses
for natural gas are administrative, politics do come into play.
He remembered when the TAPS legislation went through Congress it
banned the export of Alaska oil for more than 20 years. And when
a Chinese oil company tried to buy Unocal a few years ago,
nation-wide political pressure killed the deal.
5:26:29 PM
MR. PERSILY continued that back in his office, the Alaska
Natural Gas Pipeline Act of 2004 includes a "sense of Congress"
language that says the Lower 48 states will need Alaska gas in
the coming decades. He commented that it would certainly be
ironic and somewhat politically problematic if just as the
president is elevating the Alaska gasline to a national interest
project and just as the state's congressional delegation is
trying to win approval to increase the loan guarantee to $30
billion, if at that same time they change direction and try to
send the gas overseas. He said the federal loan guarantee, the
accelerated depreciation on the pipeline, the federal tax
credits for the North Slope gas treatment plant, even the very
assistance of the Office of Federal Coordinator and Federal Job
Training Funds - none of that is available under current law for
an export project.
The 2004 Act defines the Alaska natural gas transportation
project as a pipeline system that carries gas to the border
between Alaska and Canada, and then eventually heads south.
5:27:44 PM
MR. PERSILY said in terms of what is going on in LNG market,
there is a lot of competition in the Asian market. China and
India have local gas; China and the US are working together to
develop shale gas. China and India, in addition to some local
gas, also have the option of pipeline gas from Russia,
Turkmenistan.
In terms of existing LNG producers or countries with LNG plants
being built, you have Australia, Papua New Guinea, Sakhalin,
Indonesia, Malaysia, Brunei, Qatar, the Middle East (a swing
supplier that can go to the Atlantic Basin or to the Pacific).
In fact, Japan most recently was getting 10 percent of its spot
sales from the Atlantic based suppliers rather than just Pacific
Rim. Currently there is an oversupply of gas in the world.
He said Shell is also looking at floating LNG production and has
contracted with Samsung to build essentially a huge ship bigger
than an aircraft carrier that parks over an offshore field; it
produces, it liquefies, and then ships it out. When they are
done they move to a different spot.
MR. PERSILY said that people who think of the export market look
at pricing, because in the past just about all gas in Asia was
tied to oil prices, when oil was $80-$100. Those are attractive
gas prices and the buyers figured it out. Lately, about 20
percent of Asian LNG trade is going to spot market. The price
was tied to oil will still be in the majority, but it is not the
vast majority as it used to be.
Something else to consider, he said, is that 2007 numbers show
that 73 percent of the gas consumed in world was consumed in the
country where it was produced; about 19 percent of the gas
consumed in the world was delivered to the consuming country by
pipeline; and only 8 percent of the gas that was consumed was
delivered by LNG tanker. It is a small piece of the market, even
though it is an attractive market. To keep it in perspective,
Mr. Persily said, the North American natural gas market on a
daily basis consumes about three times the gas of India, China,
Japan, Korea, and Taiwan combined. He summed up that there are
opportunities in the LNG market, but it is very competitive;
there is a lot of gas in the Pacific Rim and a lot of LNG
projects. It is a much smaller market than North America.
5:31:12 PM
CO-CHAIR MCGUIRE asked if he had seen Representative Young's
letter to Secretary Chiu regarding the extension of the LNG
export license.
MR. PERSILY replied yes; but he hadn't any feedback on it.
5:31:45 PM
SENATOR WIELECHOWSKI asked if he had any thoughts on whether the
DOE would extend the Nikiski plant license.
MR. PERSILY answered if ConocoPhillips and Marathon, owners and
operators of the plant, determine that they have enough gas to
meet local needs and that they have some surplus, it would help
to have some place to send the gas in the summer, and if no one
protested it, they would have a pretty good shot at getting an
extension.
SENATOR WIELECHOWSKI explained that he asked that question
because one of his newsletters said there was zero chance.
MR. PERSILY clarified that was for a new export license for a
project that was totally dedicated to something.
5:33:14 PM
SENATOR WIELECHOWSKI said they keep hearing that the President
is interested in elevating his position and making this a
project of national interest and he asked what that means to the
project and the likelihood of it getting completed through the
AGIA process.
MR. PERSILY said he didn't know. He had had one meeting at the
White House and it was discussed. They haven't quite figured out
what they can contribute along with the state and the pipeline
developers and producers to help, but the President said he has
to think of something.
He mentioned that Tokyo Gas Company, one of the Kenai plant's
customers and is the largest gas supplier in Japan, recently
signed a contract with British Gas (BG) that is developing a
project in Australia; they signed a 20-year deal starting in
2015 and it would cover 11 percent of their needs for 20 years.
5:35:29 PM
CO-CHAIR MCGUIRE apologized that she couldn't get to the other
presenters and adjourned the meeting at 5:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Potential Infrastructure for In-State Gas - Swenson - April 1, 2010.pdf |
SRES 4/1/2010 3:30:00 PM |
|
| ANGDA - Instate Pipeline Cost Comparison 4-01-10.pdf |
SRES 4/1/2010 3:30:00 PM |