Legislature(2003 - 2004)

03/17/2004 03:42 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                                                                     
                                                                                                                                
CHAIR SCOTT  OGAN called the Senate  Resources Standing Committee                                                             
meeting  to  order at  3:42  p.m.  Present were  Senators  Thomas                                                               
Wagoner, Ben  Stevens, Kim  Elton and  Chair Scott  Ogan. Senator                                                               
Ralph  Seekins arrived  shortly  thereafter. The  first order  of                                                               
business to come before the committee was SB 247.                                                                               
                                                                                                                                
MS. MARY JACKSON, staff to  Senator Thomas Wagoner, sponsor of SB
247, said  the bill had been  before the committee two  times and                                                               
nothing had changed. The fiscal note is indeterminate.                                                                          
                                                                                                                                
CHAIR  OGAN  expressed  concern over  getting  permits  to  build                                                               
something to tide water in Cook  Inlet and sending a mixed signal                                                               
to the private sector that would invest in such a project.                                                                      
                                                                                                                                
     At some  point, we  need to quit  cutting bait  and get                                                                    
     our  lines in  the water  and decide  what we're  doing                                                                    
     here. I  guess I want to  get it on the  record that at                                                                    
     some  point in  the very  near future,  we're going  to                                                                    
     have to rally behind the project in this state.                                                                            
                                                                                                                                
SENATOR  THOMAS WAGONER  said this  bill does  what the  governor                                                               
wants it do, which is establish  a spur line to Cook Inlet, which                                                               
currently has state infrastructure  for manufacturing in light of                                                               
the fact that Alaska is short on proven gas reserves.                                                                           
                                                                                                                                
MS. JACKSON  informed the committee  that she attended  an Alaska                                                               
Natural Gas  Development Authority  (ANGDA) meeting in  Kenai and                                                               
was  heartened  by  comments  from  members  about  the  need  to                                                               
recognize  the value  of the  Cook Inlet  Basin. She  pointed out                                                               
that  there  is  no  permit  yet   for  the  Cook  Inlet  or  the                                                               
Southcentral route  under the ANGDA.  "Anything that can  be done                                                               
to elevate the  Southcentral and Cook Inlet Basin is  of value to                                                               
the whole state."                                                                                                               
                                                                                                                                
SENATOR RALPH SEEKINS said  he considered different possibilities                                                               
for  getting  a  line  to  Cook Inlet,  but  after  much  thought                                                               
concluded that the  market should determine which  route would be                                                               
used rather than the government.                                                                                                
                                                                                                                                
     In  that  regard,  I'm  willing   to  take  a  look  at                                                                    
     alternative routes  to the ones that  have already been                                                                    
     suggested,  because  I  think  it opens  it  to  market                                                                    
     demand rather  than legislative  dictate. That's  why I                                                                    
     intend to vote for this particular bill.                                                                                   
                                                                                                                                
CHAIR OGAN responded:                                                                                                           
                                                                                                                                
     I'm not going  to object to the bill  moving today, but                                                                    
     I do want  to put on the record that  a number of years                                                                    
                         th                                                                                                     
     ago -  this is my 10   year working  on commercializing                                                                    
     natural gas; so  I've got a little bit  of history with                                                                    
     it  - a  number of  years ago,  we had  representatives                                                                    
     that  the governor's  office hired,  you might  recall,                                                                    
     Senator Elton, the consultants  in Taiwan and Korea....                                                                    
     who  said  that  Alaska appears  dysfunctional  to  the                                                                    
     market....                                                                                                                 
                                                                                                                                
     I  agree with  Senator Wagoner  that at  this point  we                                                                    
     don't  want to  close off  our options  and we  need to                                                                    
     keep all  the tools we can  in the toolbox. But,  if we                                                                    
     have a  viable investor, when  that happens we  need to                                                                    
     get unified and  we need to send a  positive message to                                                                    
     the people that are going  to risk billions of dollars.                                                                    
     With that reservation  on the record, I'm  not going to                                                                    
     object to the thing moving out  today, but I do want to                                                                    
     keep mindful of that.                                                                                                      
                                                                                                                                
SENATOR KIM ELTON  said the chair had expressed  his concerns, as                                                               
well.                                                                                                                           
                                                                                                                                
     I do  have a concern that  we are kind of  all over the                                                                    
     dartboard on this and having  more tools in the toolbox                                                                    
     isn't necessarily bad as long  as we don't feel like we                                                                    
     have to  use them all  and have a defused  effort.... I                                                                    
     also  believe, that  if in  fact, there  was an  entity                                                                    
     that wanted  to advance  the possibility  of delivering                                                                    
     to  tidewater  in  Cook  Inlet and  it  was  a  serious                                                                    
     interest, I think  at that time, we could do  it in two                                                                    
     weeks....                                                                                                                  
                                                                                                                                
MR. HAROLD HEINZE,  CEO, ANGDA, said he wanted to  make sure that                                                               
the authority would be looking at  delivering gas via a spur line                                                               
to the  Cook Inlet  area. His  view is that  from the  20,000 ft.                                                               
level, the different routes cost about the same.                                                                                
                                                                                                                                
     We  will definitely  be doing  this. It  is one  of the                                                                    
     most important  parts of what  the authority  is about.                                                                    
     It  is  a mandate  in  the  ballot  measure as  it  was                                                                    
     passed.... In  terms of determining the  feasibility of                                                                    
     the  project, I  am  not uncomfortable  in adding  that                                                                    
     part to the mission. If you  told me I had to recommend                                                                    
     to  you a  choice between  the two  routes, I  would be                                                                    
     extremely  uncomfortable,  but  that  would  require  a                                                                    
     great deal  of work  that we  have neither  the funding                                                                    
     nor time to do.                                                                                                            
                                                                                                                                
CHAIR OGAN said  the feds hired a consultant who  did a report on                                                               
gas in Cook Inlet and asked if the report was out yet.                                                                          
                                                                                                                                
MR.  HEINZE replied  that  he is  one of  the  reviewers of  that                                                               
report in  draft form and  has had a  chance to look  through it.                                                               
The report basically  says that there is more gas  to be found in                                                               
Cook Inlet, but it  is not cheap gas and that  the price would go                                                               
up close to the price of gas in  the Lower 48. That price is what                                                               
it takes to attract the capital necessary for exploration.                                                                      
                                                                                                                                
     If we  do the spur  line, what I've  roughly calculated                                                                    
     at this  point and it seems  to be a similar  number to                                                                    
     what they  have calculated, is  that the price  in this                                                                    
     area would  be around $1  to $1.50 less than  the price                                                                    
     in the Lower 48. So, that  is some advantage of this in                                                                    
     terms of  pricing and it has  to do with the  fact that                                                                    
     there's a different  tariff to the Lower  48 than there                                                                    
     is to here.... A lot of that has to be tested.                                                                             
                                                                                                                                
     I  will tell  you also  I  have some  other reports  in                                                                    
     draft  form  that  don't necessarily  reach  that  same                                                                    
     conclusion. I am  unable to tell you at  this point how                                                                    
     the  jury will  come  down in  terms  of the  different                                                                    
     viewpoints as they exist.                                                                                                  
                                                                                                                                
CHAIR OGAN said he would be interested to see what dollar amount                                                                
gas would actually have to get to amortize a spur line. There                                                                   
were no further questions.                                                                                                      
                                                                                                                                
SENATOR WAGONER moved to pass SB 247 from committee with                                                                        
individual recommendations and attached fiscal note. There were                                                                 
no objections and it was so ordered.                                                                                            

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