Legislature(2003 - 2004)
01/21/2004 03:35 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 247-AK NATURAL GAS DEV. AUTHORITY INITIATIVE MS. MARY JACKSON, Staff to Senator Tom Wagoner, prime sponsor of SB 247, explained to members that SB 247 adds another route for ANGDA to review. Senator Wagoner believes it is in the public's best interest to study another route to provide points of comparison. She told members she distributed copies of a resolution unanimously passed by the Kenai Peninsula Borough Assembly that supports this legislation. Regarding the fiscal note, she discussed the legislation with Deputy Commissioner Porter and Mr. Heinze and they determined that SB 247 would cost more money. Mr. Heinze was forthcoming about the design costs involved. She asked Deputy Commissioner Porter to compare the fiscal note for SB 247 to the governor's bill and two differences were apparent. The governor's bill asks for a work plan - an outline of how to develop, which will cost less. SB 247 provides for a development plan. She said the dollar values should be available to the committee at the next hearing of the bill. She said that Senator Wagoner believes that due diligence is appropriate. 5:00 p.m. CHAIR OGAN expressed concern that he has studied this issue for 10 years. Yukon Pacific representatives testified in the past that the route from Prudhoe Bay to Cook Inlet could not be done. He also expressed concern that Yukon Pacific spent over $100 million on research, development and design and the committee is now discussing reinventing the wheel. He said the clock would have to start again for another environmental impact statement (EIS) and permits, and that route would run alongside Denali National Park. He speculated that the fiscal note could be huge and the project would be delayed for years. MS. JACKSON said, according to her conversation with Mr. Porter and Mr. Heinze, the fiscal note is expected to be about $1 million. She repeated that the issue is one of due diligence and to provide for a thorough discussion. CHAIR OGAN said his district would benefit greatly from having the route go through it. SENATOR WAGONER said one reason he submitted this legislation is that the Kenai Peninsula currently has the only two petrochemical manufacturing plants in Alaska that manufacture products other than fuels. Agrium manufactures urea and ammonia and Phillips manufactures LNG. He believes it is well worth the state's while to look at an expansion of this nature given the supply problems those two manufacturers have. He added: It doesn't have to be gas in Cook Inlet Basin in the Kenai, just gas supplies coming into and gridding into the system that serves the Mat Valley - Wasilla, your area and Anchorage, would alleviate the demand on the gas that is currently being produced on the Peninsula and being shipped to Anchorage on both the west side and from the Cook Inlet. There's currently pipeline capacity that runs to Anchorage - there's two pipelines. Their total capacity is a little over 200 mcf per day and, the other side coming across the Inlet, if it could be put together, there could be another 100, 150 mcf. So, the capacity is there to bring that gas down if needed on the Peninsula or we could stop pushing the gas through the lines up into Anchorage by bringing a supply from the Slope to Anchorage. That's one of the main reasons. The other reason is, like I said, maybe the LNG plant won't be feasible. Maybe the LNG project won't be feasible and the one thing you have to understand, while LNG is a very desirable fuel, LNG does not produce a large amount of jobs and a large payroll for Alaska. To just give you a cost benefit of wages, the Agrium plant throughput on the Kenai Peninsula is less than that throughput for the gas that feeds the LNG plant there. The LNG plant, including the platform, which produces their gas, employs close to 50 people. Agrium employs 250. So the value really in this gas, when you start manufacturing with this gas, is with the jobs produced so if we bring that gas down there and supplement what they're getting now for Agrium and they can run at full capacity again, that holds those jobs in place. If we develop somewhere along that system a method to use the liquids to provide feedstock for the plastics industry, that also would be much more labor intensive in those plants than an LNG plant. So I think we should look at all aspects. That's why I did the bill. I think the people of Alaska should demand that we broaden the scope of the project. CHAIR OGAN said he finds the Kenai Peninsula Borough Assembly's policy to be inconsistent given it has passed a resolution asking for the buy back of other gas uses. SENATOR WAGONER suggested asking the Assembly to explain next week. SENATOR SEEKINS said his understanding of the intent of SB 247 is to try to find a market for gas that can be sold for a profit for the citizens. He said to make a profit, one not only has to have a product, but also a willing buyer. He said in the near future there would be a market for natural gas in the Anchorage Bowl. If the state can meet that market by selling a resource that belongs to the people of Alaska at a profit, he supports that. He has never believed the state needs to support one project over another. He informed members he was a member of the Governor's North Slope Natural Gas Economic Advisory Committee under Governors Hickel and Egan, which was when the state began talking about trying to find a market for the gas and gas liquids. At that time he was told the gas liquids could fuel five world-class petrochemical facilities. He said he is looking to find the value - where the gas can be sold soon for its worth for the long run. He asked if he is correct in assuming the liquid markets and the ANGDA project would be looking at the same markets. SENATOR WAGONER said he does not believe [ANGDA] has gone that far into the project since it has only talked about LNG production. He does not believe it has looked at markets or what it would do with the liquids. TAPE 04-2, SIDE A SENATOR WAGONER continued that there are a lot of liquids and a lot of potential, which would be accompanied by jobs and increase the economic base. MR. HEINZE said that ANGDA's board hasn't taken a position on SB 247, partially because ANGDA's project brings gas into the Cook Inlet area and would be dealing with industrial, commercial and residential uses as well as power generation. He said it is very important to the Authority that gas is brought in via the spur line that has been specified in the initiative, from Glennallen to the Cook Inlet area. That reference is found not only in the benefit analysis but also in the schedule and the funding request. Additionally, sufficient feedback regarding the route from Fairbanks to the Cook Inlet area indicates there will be difficulties. He added that the hardest situation from a project management perspective is when one is faced with several difficult choices, and one has to choose "the least worst." MR. HEINZE continued that at least one company, or a group of companies, has invested millions of dollars in studying the direct route to Cook Inlet, and that information is not available to the public. He said that gaining access to that information is one of the first things he would do. That company also operates the LNG plant and he said he has asked for cooperation in the past but has not received it, and therefore it's difficult for him to get excited about "working their problem." SENATOR ELTON asked what amount of money would be required if ANGDA's statutory authority is expanded. He said a precise answer would be helpful when the bill is due for passage. 5:11 p.m. CHAIR OGAN said that an analysis of the regulatory hurdles and inclusion of the approximate timelines would be helpful. MS. JACKSON if Chair Ogan was requesting information for both SB 247 and SB 241. CHAIR OGAN responded that work had been done from the North Slope to Fairbanks but he questioned how long it would take to get an EIS and the necessary permits, and what the approximate timelines would be to continue on from Fairbanks. MR. NELS ANDERSON, JR. testified from Dillingham via teleconference and said that SB 247 makes sense if it doesn't delay moving SB 241 as quickly as possible. If the Authority has the available money, then the needs of Cook Inlet can be considered. He said, "It's been said before that the oil and gas companies have been holding 35 trillion cubic feet of gas hostage up there in the North Slope, and we've just got to get it moving." The $250 million that the Authority needs would help to answer a lot of the questions that have been asked. He said as a supporter of the initiative and of ANGDA, it is imperative that SB 241 be enacted. MR. HEINZE said he would contract out the additional work that this would place on ANGDA. The additional considerations of an alternate route, in terms of the business question, would not add to the cost, but clearly, design considerations would cost additional money. He said, "Don't give me any unfunded allocations or initiatives in this case. If you want me to do something, I'd be very happy to do it, but give me the resources to do it with at the same time." MR. SCOTT HEYWORTH, speaking on his own behalf, testified via teleconference from Anchorage and provided the following testimony: If Senator Wagoner's SB 247 to amend ANGDA law passed, ANGDA would be burdened with an impossible situation. And all of this diversion is going against the law voters passed approving the Valdez route - not the one to Kenai. Yukon Pacific Corporation [YPC] started with the Kenai route. It was rejected. A Kenai routing can never be permitted. And it would only delay us forever. I had an expert, maybe one of the best in Alaska, even the United States, do a complete review of the YPC SEIS. The SEIS is bullet proof, impossible to overturn, it would take from 5-10 years to even get to a new EIS ruling, but you cannot possibly get past the Congressional approval part. Then and only then can you start the permitting process - another 10 years - total of a 20-year delay - plus the environmental lawsuits. There are two main reasons it will never fly: 1) It is physically impossible to use the railroad right-of- way for a gas pipeline because of the physical limitations of avalanches, geo-technical, and sloping problems. For instance, the Alaska Railroad is just cut right into the sloped banks of hillsides in places - it leaves no room on either side for the siting of a pipeline. And, 2) To date, since 1980, no one has even tried to get a right-of-way through the ANILCA, Title 11 statute/law. No one even knows how you go about it. And if you can't use the ARRC right-of-way, which you can't, you MUST then get a congressional vote to go through Denali Park in some new right-of- way alignment - which Congress will never ever allow per the existing EIS law. We can't get ANWR through folks, and somebody wants Congress to put a gas line through Denali Park? It's not going to happen. This is directly stated out of the EIS: 'All three Cook Inlet alternatives are considered to be highly unfavorable due to the project time delays that would be involved in any attempt to secure congressional approval when the proposed route to Anderson Bay would avoid the Denali National Park entirely,' the EIS said because this route to Anderson Bay [indisc.] far less likely to meet with permitting delays. And that's absolutely true because it took YPC 14 years to get this permit...to sum it up, this delay would be 20 years or longer and we can't wait any longer and we have a permitting project, and, as Mr. Heinze explained to you, we have all the infrastructure and with the spur line, to get all the gas Kenai will ever need. I'll sum it up here. Kenai will get gas quickly with the existing infrastructure Enstar has, if we just build a 140-mile spur line from Glennallen to Palmer. This spur line from Glennallen comes after the main line is built, is made economical by the huge revenues from the main line going into LNG exportation from Valdez. It's called economies of scale. The spur line then hooks into the existing Enstar infrastructure that Senator Wagoner referred to earlier that goes right into Kenai today. Using the 2 twin gas lines - 12 inch and 16 inch - you can push gas right into Kenai using the Enstar system by simply reversing the flow of direction. Enstar has confirmed this for us in front of ANGDA. When we expect capacity from 2.2 feet per day to 3.0 the extra 800 million cubic feet per day can go down to spur to Southcentral and into Agrium and Nikiski. Our studies show potential cheap new gas under $3.00 delivered. New Cook Inlet gas is coming into the basket today at over $4.00, per Tony Izzo from Enstar, who testified here. Kenai will then have all the cheapest, plentiful gas it wants. And all of Southcentral gets very cheap gas forever with ANGDA. So please, I just bring to your attention that the EIS [indisc.] will take 10 or 20 years to have a permitted project. We're going to help Kenai. Kenai can expand the LNG plant, they can expand ANGDA. But Alaska cannot wait 10 or 20 more years. SENATOR WAGONER asked if a spur line could be built to the Cook Inlet without a 20-year delay, why a larger line couldn't be built over the same terrain without delay. MR. HEYWORTH responded that it would be impossible to obtain Kenai's export permit; the permit has already been issued to the highway project and to the LNG project down to Valdez. He stated that the amount of gas off the slope has already been allocated to those two projects and permitting a third export project won't happen. SENATOR WAGONER said, "We already have permits to export product." MR. HEYWORTH replied that there is not license to export 2.2 bcf, to date. SENATOR SEEKINS said that having flown through Windy Pass hundreds of times in his own aircraft and knowing the lay of the land, he asked if, by following the power line route from Healy to Cantwell, the challenge of the Denali Park area could be bypassed. CHAIR OGAN remarked that there would be time for this debate later. SENATOR WAGONER asked if Mr. Heyworth was speaking for himself, ANGDA, or for Yukon Pacific [Corporation]. MR. HEYWORTH responded that he was speaking for himself. He explained that his knowledge of the EIS and the permitting process was thorough and that he didn't write the initiative because he knew the spur line to Kenai wouldn't be permitted and because the large time delay of 5, 10, or 15 years didn't make sense to him. CHAIR OGAN asked if there was any further testimony. Hearing none, he thanked committee members and adjourned the Senate Resources Standing Committee meeting at 5:25 p.m.