Legislature(2001 - 2002)

03/28/2001 03:35 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             SB 164-NO GAS PIPELINE OVER BEAUFORT SEA                                                                       
                                                                                                                                
CHAIRMAN TORGERSON  announced SB 164 to be up for  consideration. He                                                            
explained that  SB 164 makes legislative  findings saying,  "We want                                                            
the North Slope  gas for the highest utilization to  be made for in-                                                            
state usage to the maximum  - jobs and opportunities that are within                                                            
the  state for  value-added  opportunities  and  adding significant                                                             
long-term property  base for the state  and the bill concludes  with                                                            
making  a  legislative  Best  Interest  Finding  that  prohibit  the                                                            
Commissioner from issuing  a lease for the right-of-way over the top                                                            
until a line is built south."                                                                                                   
                                                                                                                                
MR. MICHAEL HURLEY, North  American Natural Gas Pipeline Group, said                                                            
the three companies  in the group  are BP, ExxonMobil, and  Phillips                                                            
and they are, "working  diligently to develop an economically viable                                                            
project  to  commercialize  North  Slope  natural  gas  by  pipeline                                                            
through Canada to the Lower 48 markets."                                                                                        
                                                                                                                                
FERC,  before it  issues a  Certificate  of Public  Convenience  and                                                            
Necessity,  requires  them  to analyze  alternative  pipeline  route                                                            
options as  part of the  application process.  This project  has the                                                            
potential  to be the  largest energy  project in  North America  and                                                            
will require  capital  investments in  the billions  of dollars.  He                                                            
said  their  energies   are  used  for  a  thorough  evaluation   of                                                            
alternatives  and  an understanding  of  their  relative  strengths,                                                            
weaknesses,  risks  and  rewards.  Their efforts  are,  "focused  on                                                            
creating   and   understanding   opportunities,    not  prematurely                                                             
discarding them. This legislation would do the later."                                                                          
                                                                                                                                
MR.  HURLEY  said  that  limiting  options  would  discourage  other                                                            
investors in  Alaska projects. Any  Alaskan projects, "must  be able                                                            
to deliver products to  the market at a competitive cost in order to                                                            
succeed.  There  are many  other  competing  sources of  supply  and                                                            
buyers will  go elsewhere if a project  fails in that regard.  While                                                            
our  work  may show  that  a  southern  route does  offer  the  best                                                            
combination of benefits  and economic viability to Alaskans, it must                                                            
be realized  that  efforts to prohibit  the  consideration of  other                                                            
development options, such  as a northern route, may impede an Alaska                                                            
natural gas project from moving forward."                                                                                       
                                                                                                                                
MR. HURLEY  said they  were listening  to the  views of the  Alaskan                                                            
legislature   and  Alaskan   citizens   and  were   evaluating   the                                                            
alternatives on the basis of seven criteria:                                                                                    
     · Overall project economics                                                                                                
     · Alaskan access to gas                                                                                                    
     · Jobs for Alaskans                                                                                                        
     · Revenue to the State                                                                                                     
     · Safety                                                                                                                   
     · Environmental protection                                                                                                 
     · Project timing                                                                                                           
                                                                                                                                
     We do  not feel that we have  enough information, yet,  to                                                                 
     make  a  route  decision.  That  is  the  reason  for  our                                                                 
     aggressive  work  program   this  year.  The  effect  this                                                                 
     legislation  will  have on FERC  and other  agency permit                                                                  
     applications is as yet unknown.                                                                                            
                                                                                                                                
SENATOR TAYLOR  asked how this legislation would preclude  them from                                                            
analyzing all the routes.                                                                                                       
                                                                                                                                
MR. HURLEY  answered  that they don't  think that;  they don't  know                                                            
what FERC will require of them as a result of its passage.                                                                      
                                                                                                                                
CHAIRMAN TORGERSON  said he, "Found it difficult to  believe FERC is                                                            
going to make  you look at options when the President  of the United                                                            
States and Congress has  picked one. FERC doesn't have a dog in this                                                            
fight."  He   thought  not  wanting   the  southern  route   was  an                                                            
intercompany policy.                                                                                                            
                                                                                                                                
MR. HURLEY replied  that they are approaching this  as a green field                                                            
application  that would require an  alternative analysis  as part of                                                            
the backup of the application.                                                                                                  
                                                                                                                                
CHAIRMAN  TORGERSON  asked  if they  were  ignoring  the  authorized                                                            
route.                                                                                                                          
                                                                                                                                
MR. HURLEY replied  that the lack of clarity about  how the old laws                                                            
applied  and  whether they  still  apply  has  caused them  to  push                                                            
forward as if it were a green field application.                                                                                
                                                                                                                                
SENATOR LINCOLN  said that she was  a bit offended by his  testimony                                                            
today. "To  me it suggests  that we  have not  been diligent  in our                                                            
analysis of  the different routes  and what's in the best  interests                                                            
of the  state." She didn't  think there had  ever been any  question                                                            
about the dedication  of Alaskans' access to gas and  jobs, revenues                                                            
to  the  state, safety  and  environmental  protection.  As  far  as                                                            
timing, "We would like to see that done as quickly as possible…"                                                                
                                                                                                                                
SENATOR LINCOLN  continued: "This Chair, I've given  him great kudos                                                            
for  really  taking  the Resources  Committee  through  all  of  the                                                            
routes,  to   hearing  the  public   testimony,  hearing   from  the                                                            
producers,  to  hearing  from  the different  groups  that  have  an                                                            
interest in this."                                                                                                              
                                                                                                                                
MR. HURLEY apologized and said it wasn't intended to offend.                                                                    
                                                                                                                                
MR.  BILL  BRITT,  Alaska   State  Pipeline  Coordinator,   strongly                                                            
supported SB 164. The over-the-top  route is not in the state's best                                                            
interests for  the reasons sighted  nor do they believe it  would be                                                            
cheaper  or  faster  due  to a  variety  of  design  and  permitting                                                            
considerations.                                                                                                                 
                                                                                                                                
However, a brief  legal review has revealed some possible  legal and                                                            
constitutional  issues, especially related to separation  of powers.                                                            
He  said they  needed  more  time to  examine  the issue.  They  are                                                            
concerned  about the precedent  of this  very prescriptive  statute.                                                            
They agree with  the policy, but feel that they would  be led to the                                                            
same result without the prohibition in section (b), page 3.                                                                     
                                                                                                                                
CHAIRMAN TORGERSON asked  what the separation of powers issue he was                                                            
concerned with.                                                                                                                 
                                                                                                                                
Number 1800                                                                                                                     
                                                                                                                                
MR. JACK  GRIFFIN, Supervisor  of the  Oil and  Gas Division  in the                                                            
Department of Law, said  their legal review has been cursory, but on                                                            
the face of the bill there is a separation of powers concern.                                                                   
                                                                                                                                
     While  the  legislature  clearly  has the  constitutional                                                                  
     authority  to  establish  land  use policy  in  the  first                                                                 
     instance, as a rule it establishes  that policy on laws of                                                                 
     general  applicability  and leaves the  implementation  of                                                                 
     that policy  to the executive branch. That's the  approach                                                                 
     the  legislature  has  chosen  and  is  reflected  in  the                                                                 
     current Right-of-Way Leasing Act.                                                                                          
                                                                                                                                
     SB 164,  on the other  hand, starts  off with the general                                                                  
     and very  legitimate policy consideration  articulated  by                                                                 
     the  legislature, but  then in subparagraph  (b), directs                                                                  
     the commissioner  to exercise the discretion in  the event                                                                 
     the  commissioner   sees  application  for  a  particular                                                                  
     project  in a  particular area.  The problem  here is  not                                                                 
     really  what the bill  would do, but  how it would do  it.                                                                 
     For  example,  the legislature  clearly  makes  the  state                                                                 
     lands   under  the   Beaufort  Sea  a   state  park.   The                                                                 
     legislature  could clearly  circumscribe  the territorial                                                                  
     reach of the  Right-of-Way Leasing Act so that  it doesn't                                                                 
     reach  submerged lands  and the legislature  could follow                                                                  
     its  legitimate policy  articulating  not only applicable                                                                  
     policy considerations  that must be evaluated  and applied                                                                 
     by the executive  to implement this particular  act. Those                                                                 
     would be much easier to defend.                                                                                            
                                                                                                                                
     It's  possible to put  an interpretive  clause on section                                                                  
     (b)  that would in  effect interpret  it as essentially  a                                                                 
     elucidation  on the territorial scope of the Right-of-Way                                                                  
     Leasing  Act. I  think the  problem with  that particular                                                                  
     interpretation,    though,  is   that   it   ignores   the                                                                 
     specificity  with which the bill identifies the  offending                                                                 
     project. For  example, the commissioner can still  issue a                                                                 
     right-of-way  lease for a gas  pipeline that would follow                                                                  
     the  ANWR  coast to  Kaktovik.  The  pipeline goes  on  to                                                                 
     Canada  and then south  at the commissioner's  discretion                                                                  
     has  been eliminated.   Conditions  are  [indisc.] saying                                                                  
     separation  of powers concerns  that the specificity  with                                                                 
     which  that particular  project is  identified raises,  at                                                                 
     least  potentially,   concerns  under  the  United   State                                                                 
     Commerce  Clause and  under the  U.S. and  State people's                                                                  
     protection clauses.                                                                                                        
                                                                                                                                
He didn't  have enough time  to analyze whether  those concerns  are                                                            
significant, but on the  face of the bill they could be significant.                                                            
                                                                                                                                
CHAIRMAN  TORGERSON  said  those  same  concerns  were also  in  the                                                            
NorthStar  agreement  in which  Kachemak Bay  Reserve  was made  off                                                            
limits  to oil  and gas  drilling,  and that  passed  muster of  the                                                            
Supreme  Court. He advised  Mr. Griffin  to check  it out if  he had                                                            
some free time, but he thought it would be a waste.                                                                             
                                                                                                                                
SENATOR TAYLOR  moved to pass SB 164 from committee  with individual                                                            
recommendations. There were no objections and it was so ordered.                                                                

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