Legislature(2003 - 2004)

01/21/2004 03:35 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                               

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