Legislature(2009 - 2010)BUTROVICH 205

03/18/2010 03:30 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
*+ SB 294 SPORT FISH GUIDE LICENSES TELECONFERENCED
Scheduled But Not Heard
*+ SB 287 IN-STATE GAS PIPELINE TELECONFERENCED
Heard & Held
+= SB 228 TAX INCENTIVES FOR GAS-TO-LIQUID TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 242 GEOTHERMAL RESOURCE TAX CREDITS
Moved CSSB 242(RES) Out of Committee
= SB 243 NO ROYALTY ON GEOTHERMAL RESOURCE
Moved CSSB 243(RES) Out of Committee
                  SB 287-IN-STATE GAS PIPELINE                                                                              
3:35:04 PM                                                                                                                    
CO-CHAIR MCGUIRE  said the committee  would be talking  about the                                                               
issue of  in-state gas and the  dire need to get  gas to Alaskans                                                               
for residential  and commercial use. She  introduced U.S. Senator                                                               
Ted Stevens.                                                                                                                    
                                                                                                                                
U.S. SENATOR  TED STEVENS  said countries  such as  India, Korea,                                                               
China  and Japan  will have  an increasing  gas shortage.  Alaska                                                               
could compete in the  LNG market if the gas can  be moved. Once a                                                               
transportation mechanism is  in place to take the  gas to market,                                                               
he believes more gas will be  discovered. The state has to put up                                                               
the money and  demonstrate that it will help  finance an in-state                                                               
line. The key  is to get gas  to the Kenai to keep  the LNG plant                                                               
going.                                                                                                                          
                                                                                                                                
3:38:24 PM                                                                                                                    
Acute  shortages  will happen  by  2013  or  2014. He  urged  the                                                               
Legislature to make an offer on  behalf of the state to invest in                                                               
an  in-state  line  and  not  to  wait  for  an  open  season  or                                                               
bureaucratic  analysis. The  state should  finance the  line, not                                                               
build  it. Substantial  revenue will  come to  the state  through                                                               
royalties and severance taxes.                                                                                                  
                                                                                                                                
The  future for  Alaska's  gas lies  in  the conversion  process.                                                               
Marketing  Alaska's gas  to  the Pacific  Rim  could provide  the                                                               
money to  finance the  development of coal  or gas  conversion to                                                               
liquids. The  state should  show the gas  industry that  it wants                                                               
gas moved now;  he producers will come forward  and cooperate. He                                                               
envisions two  LNG ports in Alaska:  one is already at  Kenai and                                                               
the other will be at Valdez.                                                                                                    
                                                                                                                                
3:41:12 PM                                                                                                                    
U.S. SENATOR TED  STEVENS said Alaska's economy  will go downhill                                                               
rapidly if something  is not started this year.  The oil pipeline                                                               
used to  carry 2.1 million  barrels a  day and now  carries about                                                               
600,000 barrels a day. Alaska  cannot survive on a one-third full                                                               
pipeline; gas  must start moving.  As people drill for  more gas,                                                               
they will  also find  more oil  and the  oil pipeline  could come                                                               
back to its former production levels.                                                                                           
                                                                                                                                
CO-CHAIR MCGUIRE thanked him and said  all members have a copy of                                                               
the presentation he  made to Commonwealth North.  She asked about                                                               
his concerns about the Alaska  Gasline Inducement Act (AGIA) with                                                               
respect to shale discoveries.                                                                                                   
                                                                                                                                
U.S. SENATOR  TED STEVENS replied that  AGIA does not need  to be                                                               
abandoned, but  put aside. Canada  and the  Lower 48 will  bid on                                                               
gas going to the  Alberta hub but no one will rush  to put gas in                                                               
that line  with the prices  that exist  for the Alberta  hub now.                                                               
LNG in  the Pacific  Rim is  sold at  $2 to  $4 more  per million                                                               
cubic feet (Mcf) than in the  U.S. The delay on the Canadian line                                                               
has put Alaska at a standstill.                                                                                                 
                                                                                                                                
3:44:41 PM                                                                                                                    
SENATOR HUGGINS asked U.S. Senator  Ted Steven's for his thoughts                                                               
on gas to liquids.                                                                                                              
                                                                                                                                
U.S. SENATOR  TED STEVENS  replied that  an additional  source of                                                               
jet fuel  is needed to  retain the air  bases in Alaska.  Coal to                                                               
liquids or  gas to liquids is  part of the future  of Alaska. The                                                               
process is  expensive and development  will not  progress without                                                               
substantial public funding which could  come from the sale of LNG                                                               
to the Pacific Rim.                                                                                                             
                                                                                                                                
CO-CHAIR  WIELECHOWSKI  asked  for   U.S.  Senator  Ted  Steven's                                                               
thoughts on  the ability  to get  an export  license to  ship gas                                                               
overseas.                                                                                                                       
                                                                                                                                
U.S.  SENATOR TED  STEVENS replied  that the  prohibition against                                                               
export was  for oil  brought about  by Senator  Mondale's feeling                                                               
that oil,  in short supply at  the time, should not  be exported.                                                               
Exporting  Alaska's   gas  is  not  prohibited;   it  was  always                                                               
contemplated that if the LNG got  to Valdez, it could be put into                                                               
the world market.  He urged the committee to  study LNG marketing                                                               
in India,  Korea, China  and Japan.  Korea is  almost exclusively                                                               
dependent on LNG for its gas.  They would welcome Alaska's gas if                                                               
they can get it.                                                                                                                
                                                                                                                                
CO-CHAIR  WIELECHOWSKI under  AGIA, TransCanada  was specifically                                                               
requested to  do an open  season down to  Valdez to test  and see                                                               
what the  market was for a  gas pipeline from the  North Slope to                                                               
Valdez.  Do you  think going  through  with that  open season  is                                                               
sufficient or  do you  think we should  be doing  something other                                                               
than that.                                                                                                                      
                                                                                                                                
U.S. SENATOR TED  STEVENS replied that an open  season is another                                                               
delay is  not needed to  find out if  those four nations  want to                                                               
buy gas. They  are already competing with each other  to get LNG.                                                               
He  reiterated that  private funding  is  needed to  get the  gas                                                               
lines built; producers want to see some money come forward.                                                                     
                                                                                                                                
3:48:52 PM                                                                                                                    
The Pacific  Rim is  a competitive but  high price  market. Taxes                                                               
are not  needed if  the gas  is selling  at $2  to $4  above U.S.                                                               
prices. Alaska can invest in a  gas line and be co-owner, getting                                                               
money from severance taxes, royalties and profits.                                                                              
                                                                                                                                
CO-CHAIR MCGUIRE said she appreciated his knowledge and remarks.                                                                
                                                                                                                                
U.S.  SENATOR  TED STEVENS  said  his  comments  are not  for  or                                                               
against any bill, nor is he representing anyone or being paid.                                                                  
                                                                                                                                
3:51:00 PM                                                                                                                    
BILL  SHEFFIELD  [Former  Alaska   Governor]  said  that  besides                                                               
exporting, a  gas line to  Southcentral Alaska  through Fairbanks                                                               
would get gas  to 500,000 people and provide a  lower the cost of                                                               
living. Alaska can  either build a gas line for  $4 or $5 billion                                                               
and not get  money back or buy  in at 49 percent  and provide the                                                               
form for a  contractor who might want to build  and own the line.                                                               
This would create  jobs, a lower cost of  living, enterprises and                                                               
new businesses.                                                                                                                 
                                                                                                                                
3:55:44 PM                                                                                                                    
If the  legislature and governor  would commit the money,  a line                                                               
could be  ready in two or  three years that would  pay for itself                                                               
through revenue.                                                                                                                
                                                                                                                                
CO-CHAIR  MCGUIRE said  she  put  the gas  team  with the  Alaska                                                               
Railroad,  in part,  because  the Railroad  is  quasi public  but                                                               
deals with  building things  with the  private sector.  She asked                                                               
what  Mr. Sheffield  thinks  about the  bonding  ability and  the                                                               
interplay between public and private at the Railroad.                                                                           
                                                                                                                                
MR.   SHEFFIELD  replied   that  the   Alaska  Railroad   has  an                                                               
extraordinary ability  to bond. The  Railroad would have  to hire                                                               
people for pipeline construction as a separate operation.                                                                       
                                                                                                                                
CO-CHAIR MCGUIRE  asked General Pat  Gamble how he  envisions the                                                               
Railroad's  role -  its bonding  ability and  interplay with  the                                                               
private sector.                                                                                                                 
                                                                                                                                
3:59:29 PM                                                                                                                    
GENERAL   PAT  GAMBLE,   president  and   CEO,  Alaska   Railroad                                                               
Corporation,  said Alaska  Railroad's  purpose is  transportation                                                               
but it  is also a tool  for economic development. A  gas pipeline                                                               
would create a  lower cost of living in Alaska  that would create                                                               
an attractive  economic climate for  businesses that need  to see                                                               
affordable  energy   and  potential  for   economic  development.                                                               
Investment  in   coal  to  gas  would   also  help  environmental                                                               
improvements, such as air quality.                                                                                              
                                                                                                                                
He said  the state is  spending a million  here and there  to fix                                                               
something that is not quite  right instead of spending several or                                                               
tens of millions on a  large project that will return investments                                                               
for  years to  come.  From the  Railroad's point  of  view as  an                                                               
economic  developer, the  recommendations from  the previous  two                                                               
speakers  about the  gas  line  could be  what  is  best for  all                                                               
Alaskans and turn the state  around quickly. He said the railroad                                                               
does  have the  bonding  capability, is  available  with a  great                                                               
engineering team and knows permitting and licensing.                                                                            
                                                                                                                                
4:03:49 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI said he has  heard tariff estimates ranging                                                               
from $6 to $7 for an  in-state gas line without an anchor tenant,                                                               
potentially   doubling  the   cost  of   gas  for   consumers  in                                                               
Southcentral. He asked  General Gamble if the  state should build                                                               
the gas line and industries will  develop or wait for industry to                                                               
say  there is  demand and  the  line can  be built  with a  lower                                                               
tariff.                                                                                                                         
                                                                                                                                
GENERAL GAMBLE  replied that at  least one major  anchor customer                                                               
is needed.  He recalled Governor  Frank Murkowski going  to Korea                                                               
about  seven  years  ago  for   meetings  with  potential  energy                                                               
customers  who  said  "as  soon  as you  all  get  serious  about                                                               
actually  producing the  gas, come  see us  because we  are very,                                                               
very interested".  A major  state marketing  effort is  needed to                                                               
show the state's commitment and  start getting buyer's commitment                                                               
for the product.                                                                                                                
                                                                                                                                
SENATOR  HUGGINS noted  that a  recent letter  from the  Governor                                                               
shows  his  commitment  to  an in-state  gas  project.  He  asked                                                               
General Gamble  if an instate  gas project would help  the Alaska                                                               
Railroad's business plan.                                                                                                       
                                                                                                                                
4:07:50 PM                                                                                                                    
GENERAL GAMBLE replied that the  Railroad, attached to many parts                                                               
of  the economy,  is  cost  cutting, making  a  tight budget  and                                                               
keeping lines of service open  while preserving capitol until the                                                               
future can  be determined. The Railroad  is in a position  to fit                                                               
with operations  or the financial  side [of a gas  line project].                                                               
All earnings  go back into capitol  which goes back in  to making                                                               
the   Railroad  more   efficient  and   safe  and   working  with                                                               
communities.  That means jobs,  contracts and all good things for                                                               
the state.                                                                                                                      
                                                                                                                                
CO-CHAIR  MCGUIRE  asked General  Gamble  about  the two  bonding                                                               
cycles  he  has  gone  through   and  what  that  unique  bonding                                                               
authority brings to the table.                                                                                                  
                                                                                                                                
4:10:40 PM                                                                                                                    
GENERAL  GAMBLE said  the Railroad's  experience in  medium-sized                                                               
sale  comprised $165  million worth  of bonds  that the  Railroad                                                               
sold to accelerate  the rebuild of a track  between Anchorage and                                                               
Fairbanks. The  first time in the  market, the bonds sold  out in                                                               
the first or second day of the first and second rounds.                                                                         
                                                                                                                                
CO-CHAIR MCGUIRE  said the  Governor has given  his support  to a                                                               
gas line project and will lend  cabinet members to work on right-                                                               
of-way and other issues.                                                                                                        
                                                                                                                                
SENATOR FRENCH  asked General Gamble  how the state  balances its                                                               
desire to get started right  now, with or without the cooperation                                                               
of the producers.                                                                                                               
                                                                                                                                
4:13:50 PM                                                                                                                    
GENERAL  GAMBLE replied  that  as a  business  person, trying  to                                                               
develop a business case, he is  not as risk adverse as [the state                                                               
or Legislature]  might be. In order  to do a risk  assessment, he                                                               
would  start   making  contact  with  customers   and  get  early                                                               
indications  that  his  actions  will   get  the  right  kind  of                                                               
reactions and  even early commitments.  That reduces risk  to the                                                               
business case and gives the confidence to go forward.                                                                           
                                                                                                                                
MR. FRANK  MURKOWSKI [former  governor of  Alaska] said  the need                                                               
for an instate  gas project must be based on  sound economics. He                                                               
mentioned his  belief that any  liability the state may  have for                                                               
damages with TransCanada  should not be a deciding  factor in the                                                               
gas line debate.                                                                                                                
                                                                                                                                
4:18:14 PM                                                                                                                    
He  said he  is in  favor of  an aggressive  policy to  achieve a                                                               
bullet  line project  by mid-decade  when shortages  will be  far                                                               
more  severe. The  gas is  needed by  residential and  commercial                                                               
consumers in Alaska. Bullet line  construction will provide jobs,                                                               
bring about  secondary development projects and  spur new capital                                                               
investment on the  North Slope. A gas line could  also offset the                                                               
revenue decline associated with the decline in the flow of oil.                                                                 
                                                                                                                                
4:21:23 PM                                                                                                                    
MR. MURKOWSKI  said that in  2006, Exxon, BP and  Conoco Phillips                                                               
initialed a proposal to proceed with  the gas line project to the                                                               
Lower 48, subject to legislative  approval, which never came. The                                                               
state was  going to take a  20-percent equity in the  project and                                                               
have  a seat  at  the table.  He mentioned  a  few other  details                                                               
related  to  this  former   proposal.  The  Palin  Administration                                                               
abandoned these efforts  and proceeded with a proposal  to have a                                                               
non-producer owned  pipeline. TransCanada placed one  bid and the                                                               
Palin  Administration   worked  with   TransCanada  to   urge  an                                                               
agreement with the  producers. TransCanada still does  not have a                                                               
gas supply.  The market  dimension has  changed. An  abundance of                                                               
shale gas  is close to  market without  a pipeline cost  and more                                                               
gas is being discovered all the time.                                                                                           
                                                                                                                                
4:25:19 PM                                                                                                                    
Alaska  has to  change with  the  economics that  will drive  the                                                               
project. In  the meantime, the  bullet line is important.  He has                                                               
asked producers if they would make  gas available to the state on                                                               
a long-term  contract and the  response was yes. The  question is                                                               
if the project  is economically viable. A  detailed business plan                                                               
should  be  finished  covering the  market  potential,  the  cost                                                               
pricing of the  gas, debt reduction and the value  of a long-term                                                               
sustainable  supply  for  Alaska's   Railbelt.  He  sees  a  huge                                                               
potential return to  the state and does not  see an inconsistency                                                               
between  the bullet  line and  a gas  line to  the Lower  48. The                                                               
bullet line  could provide first gas  by 2016 to 2018  as opposed                                                               
to at least ten years before a bigger line is operational.                                                                      
                                                                                                                                
4:29:09 PM                                                                                                                    
Constructing  a  bullet  line  would  provide  emphasis  for  gas                                                               
exploration  that could  supply  both projects.  The bullet  line                                                               
should be scheduled with a series  of milestones. If the main gas                                                               
line appears ready to go at  any milestone, the bullet line would                                                               
be halted. However, he said he  thinks enough gas exists for both                                                               
lines. The legislation  should be set up with  the opportunity to                                                               
achieve the ideal business model  for the bullet line project: to                                                               
be  privately  financed,  constructed   and  owned.  Bullet  line                                                               
legislation  could include  provisions designating  right-of-way,                                                               
streamlining  permitting  and  providing  for  a  strong  project                                                               
manager whose main  objective is to maximize  demand by obtaining                                                               
commercial letters of  intent to buy gas, thus  reducing the cost                                                               
of gas to gas users.                                                                                                            
                                                                                                                                
4:32:25 PM                                                                                                                    
The state could then put the  project out to competitive bids. If                                                               
the project is  not economical, the project manager  will let the                                                               
governor and Legislature know and terminate the project.                                                                        
                                                                                                                                
4:35:02 PM                                                                                                                    
SENATOR WAGONER  asked about marketing the  state's gas overseas.                                                               
He  asked if  the  gas users  in the  Orient  already know  about                                                               
Alaska's gas reserves.                                                                                                          
                                                                                                                                
MR.  MURKOWSKI replied  yes but  until infrastructure  is put  in                                                               
place  to   move  the  gas   to  tidewater,  the   discussion  is                                                               
hypothetical.                                                                                                                   
                                                                                                                                
SENATOR  WAGONER  said he  thinks  interested  gas users  in  the                                                               
Orient can  take capacity  in the TransCanada  line; then  a spur                                                               
line would  come off that. He  sees that as the  best opportunity                                                               
but  is  unsure  if  people  are willing  to  take  capacity  and                                                               
negotiate with the producers for the gas.                                                                                       
                                                                                                                                
MR.  MURKOWSKI replied  that the  economics change  at any  given                                                               
time and  the problem with  trying to get commitments  on volumes                                                               
of  gas for  LNG  is that  nobody is  compiling  a detailed  cost                                                               
analysis for  delivering gas  to Valdez or  Kenai for  export. He                                                               
said he doesn't  expect anything dramatic at  open season because                                                               
major companies  have gas all over  the world and are  moving gas                                                               
that  is most  profitable and  closest to  market, such  as shale                                                               
gas.   In  the   meantime,  a   bullet  line   is  a   worthwhile                                                               
consideration because  the Railbelt is  not a huge market  but it                                                               
is a  known and  expanding market.  Conoco Philips  will probably                                                               
continue to  export out of Kenai  if they can get  a sustained or                                                               
expanding supply.                                                                                                               
                                                                                                                                
4:40:51 PM                                                                                                                    
SENATOR  FRENCH   asked  what  level  of   state  investment  Mr.                                                               
Murkowski would advocate for in building the bullet line.                                                                       
                                                                                                                                
MR.  MURKOWSKI  suggested  something   similar  to  the  previous                                                               
proposal  that producers  had agreed  upon: the  state taking  20                                                               
percent  equity and  having a  seat at  the table.  When the  oil                                                               
pipeline was in the planning  stages, Governor Egan proposed that                                                               
the  state  take  an  equity interest  but  the  Legislature  was                                                               
reluctant to do  so, feeling that the state should  not be in the                                                               
business. Time  and legal  bills have proven  it would  have been                                                               
best for the state  to have an interest in the  oil line and that                                                               
the  royalties  would  have  been   significant  returns  on  the                                                               
investment. It makes  sense to take a proportional  risk and have                                                               
a seat at the table.                                                                                                            
                                                                                                                                
4:44:10 PM                                                                                                                    
SENATOR STEVENS moved to adopt  the proposed committee substitute                                                               
(CS) for  SB 287, labeled  26-LS1467\R, as the  working document.                                                               
There being no objection, version R was before the committee.                                                                   
                                                                                                                                
MICHAEL PAWLOWSKI,  Staff to Senator McGuire,  said references to                                                               
Alaska  Housing Financing  Corporation (AHFC)  have been  removed                                                               
from SB  287. Section  1, beginning on  page 1,  acknowledges the                                                               
role that  the Alaska Natural  Gas Development  Authority (ANGDA)                                                               
has had in  the in-state gas picture. Minor changes  were made in                                                               
language  and a  new  subsection was  added  clarifying that  the                                                               
purpose of the SB 287 is in  the best interest of Alaska. On page                                                               
3,  Section 3  of SB  287, [amending  AS 42.40.560]  new language                                                               
gives broader  authorization for  Alaska Railroad to  move beyond                                                               
financing  into construction  if  needed. On  page  5, Section  5                                                               
[amending  the uncodified  law]  says  that in  the  event of  an                                                               
agreement on the  AGIA project, the governor  and the Legislature                                                               
together could decide to stop work on this project.                                                                             
                                                                                                                                
4:46:49 PM                                                                                                                    
CO-CHAIR MCGUIRE said  she would offer two  amendments. She moved                                                               
to adopt conceptual amendment 1.                                                                                                
                                                                                                                                
SENATOR STEVENS objected for the purpose of discussion.                                                                         
                                                                                                                                
CO-CHAIR MCGUIRE  explained that  conceptual Amendment  1 changes                                                               
the immediate effective date on page  7, line 2, to July 1, 2010.                                                               
This would  allow for  a smooth transition  and for  the governor                                                               
and his gas team to complete their work as targeted.                                                                            
                                                                                                                                
SENATOR STEVENS removed his objection.                                                                                          
                                                                                                                                
CO-CHAIR  MCGUIRE  announced  that  with  no  further  objection,                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
CO-CHAIR MCGUIRE moved to adopt conceptual Amendment 2.                                                                         
                                                                                                                                
SENATOR STEVENS objected for purpose of discussion.                                                                             
                                                                                                                                
CO-CHAIR MCGUIRE  said conceptual  Amendment 2 addresses  page 1,                                                               
lines 4-5 and  removes the language about  removing the authority                                                               
"from the  Office of the  Governor and the Department  of Natural                                                               
Resources" (DNR)  and placing it  in the Railroad. The  Office of                                                               
the  Governor has  authority over  the Railroad  and she  clearly                                                               
envisions a  role for the governor  who has come on  board in the                                                               
form of a letter.                                                                                                               
                                                                                                                                
4:49:42 PM                                                                                                                    
SENATOR STEVENS  asked if conceptual Amendment  2 removes placing                                                               
[an in-state gas project] in the Railroad.                                                                                      
                                                                                                                                
CO-CHAIR MCGUIRE replied  no, the amendment still  allows [an in-                                                               
state gas project]  to be placed in the Railroad  but deletes the                                                               
specific reference  to removing  the project  from the  Office of                                                               
Governor and  DNR and says simply,  in the positive, that  we are                                                               
placing [an  in-state natural gas  project] in the  Railroad. She                                                               
explained that her intent was  to place [an in-state gas project]                                                               
in a new  entity but she was concerned that  the current language                                                               
would  unintentionally prevent  the Office  of the  Governor from                                                               
having any role.                                                                                                                
                                                                                                                                
SENATOR  FRENCH  said  attention  is  still  drawn  to  the  word                                                               
"exclusive"  [page  1,  line  3].  He asked  if  using  the  word                                                               
"exclusive" creates friction about who is in charge.                                                                            
                                                                                                                                
CO-CHAIR MCGUIRE  replied that she  does envision  other parties'                                                               
participation but  would hesitate  to remove "exclusive"  and end                                                               
up with multiple  gas teams without any clear  authority over the                                                               
initiation  and development  of the  project. The  initiation and                                                               
development   of  the   project   is  at   the  Alaska   Railroad                                                               
Corporation.                                                                                                                    
                                                                                                                                
SENATOR FRENCH asked if the administration has a position on it.                                                                
                                                                                                                                
CO-CHAIR  MCGUIRE she  said the  administration is  aware of  the                                                               
conceptual amendment and is working with her office.                                                                            
                                                                                                                                
SENATOR  WAGONER asked  how long  it  will be  before the  Alaska                                                               
Railroad  can take  on exclusive  and primary  responsibility for                                                               
initiation and development of the  project. He does not feel that                                                               
the Railroad is ready to go on this project.                                                                                    
                                                                                                                                
4:53:16 PM                                                                                                                    
CO-CHAIR  MCGUIRE said  the in-state  gas caucus  spent a  lot of                                                               
time thinking about  the appropriate place to  house the project.                                                               
She envisions  the work that  Harry Noah [former  project manager                                                               
for  the  in-state  gas  line  project]  has  done  already,  his                                                               
engineers,  the  project  permitting, data  collection,  etc.  to                                                               
transfer with the authority and  continue. Where to house the gas                                                               
team  is  an ongoing  question  but  it  must  have a  chance  of                                                               
survival  and an  opportunity to  consider bonding.  AHFC is  the                                                               
only  other place  with bonding  authority and  they don't  build                                                               
things. People  at the  Railroad are confident  they can  bring a                                                               
team on.  SB 287 has milestones  and if the Railroad  cannot meet                                                               
those milestones, they would communicate with the Legislature.                                                                  
                                                                                                                                
SENATOR WAGONER  asked if Mr.  Noah is  still heading up  the in-                                                               
state gas project.                                                                                                              
                                                                                                                                
CO-CHAIR MCGUIRE  replied no,  he has resigned,  but his  work is                                                               
still there  and Bob  Swenson has  continued some  of it.  A team                                                               
needs to come in and take up the work.                                                                                          
                                                                                                                                
4:56:49 PM                                                                                                                    
CO-CHAIR MCGUIRE  said the Legislature cannot  leave this session                                                               
without putting  this project  where it can  be evaluated  in the                                                               
event that AGIA goes sideways.  Alaska needs to have control over                                                               
its own destiny with respect to an in-state line.                                                                               
                                                                                                                                
CO-CHAIR  MCGUIRE  announced  that  with  no  further  objection,                                                               
Amendment 2 was adopted.                                                                                                        
                                                                                                                                
SENATOR FRENCH said Amendment 3,  labeled 26-LS1467\R.1, would be                                                               
taken up Monday.                                                                                                                
                                                                                                                                
4:59:09 PM                                                                                                                    
CO-CHAIR MCGUIRE opened public testimony.                                                                                       
                                                                                                                                
BILL WALKER, project manager and  general counsel, Alaska Gasline                                                               
Port Authority, thanked  the committee for taking  action and for                                                               
acknowledging  the  decline in  oil.  He  said the  world  market                                                               
opportunity will make  a difference to Alaska. He  favors a large                                                               
volume  pipeline  as  opposed  to   a  low  volume  pipeline.  He                                                               
encouraged the  committee not to  start over but to  walk through                                                               
the Yukon  Pacific Corporation's permits  and data. He  liked the                                                               
language in SB  287 allowing the acquisition of  permits and said                                                               
the  Port Authority  had  permits  at one  time  which are  still                                                               
available.  He asked  the  committee to  look  at the  difference                                                               
between a  state subsidy  on a low  volume pipeline  versus state                                                               
investment  on a  high volume  pipeline: the  state would  put in                                                               
roughly  the same  amount of  money but  would get  a 12  percent                                                               
return on a larger line.                                                                                                        
                                                                                                                                
CO-CHAIR  WIELECHOWSKI asked  if Mr.  Walker agreed  with putting                                                               
this project  into the  Railroad's jurisdiction  or if  he thinks                                                               
there is a better place.                                                                                                        
                                                                                                                                
MR. WALKER  replied he does  not have  a strong opinion  on that.                                                               
The Railroad has incredible bonding  opportunities tied in with a                                                               
loan  guarantee. He  said ANGDA  is  another option  and he  sees                                                               
ANGDA is blended into SB 287.                                                                                                   
                                                                                                                                
SENATOR WAGONER  asked if any  people, companies  or corporations                                                               
in  the Orient  are  looking for  an LNG  project  to Valdez  and                                                               
looking at the open season.                                                                                                     
                                                                                                                                
MR. WALKER  replied that there  have been  previously. Mitsubishi                                                               
was a  partner with  the Port  Authority. He  has met  with Tokyo                                                               
Gas, Tokyo  Electric and Korean  Gas. There is a  strong interest                                                               
in the Orient  but they need to see that  Alaska is serious about                                                               
moving a project forward.                                                                                                       
                                                                                                                                
5:05:56 PM                                                                                                                    
[Audio stopped  due to technical  difficulties from 5:05  p.m. to                                                               
5:09 p.m.  CO-CHAIR MCGUIRE called an at ease during this time.]                                                                
                                                                                                                                
5:09:38 PM                                                                                                                    
CO-CHAIR MCGUIRE  called the meeting  back to order and  said the                                                               
LIO would be dialing back in. SB  287 would be brought back up on                                                               
Monday with further testimony.                                                                                                  
                                                                                                                                
MR. WALKER  said the  new chairman  of Federal  Energy Regulatory                                                               
Commission (FERC) has said he  can't imagine FERC standing in the                                                               
way of exporting gas.                                                                                                           
                                                                                                                                
CO-CHAIR MCGUIRE said  the chairman of FERC has said  that to her                                                               
in person.                                                                                                                      
                                                                                                                                
[SB 287 was held in committee.]                                                                                                 
                  SB 287-IN-STATE GAS PIPELINE                                                                              
                                                                                                                                
5:23:32 PM                                                                                                                    
CO-CHAIR MCGUIRE returned to SB 287 to allow further testimony.                                                                 
                                                                                                                                
BERNIE  KARL,   owner,  Chena  Hot  Springs   Resort,  Fairbanks,                                                               
supported SB  287. He has  worked with  the Alaska Railroad  as a                                                               
customer for 26 years and said it  is a good place for a gas line                                                               
project. The state should finance  the line without looking for a                                                               
return at the start but building  it in later. If the pipeline is                                                               
built and  we have  cheap energy,  hearings will  be held  to see                                                               
what businesses  and people  are wanted to  work here  in Alaska.                                                               
Alaska has the  best record of any state or  country for shipping                                                               
LNG. Having  the largest  fertilizer plant  in the  world sitting                                                               
idle does not make sense; it  would start up with reasonable gas.                                                               
He said  the oil companies  will sell gas;  they sell gas  on the                                                               
North Slope  now and  sell gas to  themselves. They  have already                                                               
set  a good  rate. He  said  SB 287  takes Alaska  into the  next                                                               
centuries  with  cheap, clean  energy  for  everyone. "The  state                                                               
should bite the bullet and build the bullet."                                                                                   
                                                                                                                                
[SB 287 was held in committee.]                                                                                                 

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